Cellebrite DI Stock

Okay. Great. Thank you, everybody, for joining us today. For those of you who don't know me, I'm Rudy Kessinger. I cover security and infrastructure software here at D.A. Davidson. And we have pretty much the whole management team from Cellebrite joining us today. We have CEO, Shiv Ramji; CFO, David Barter; CTO, Chris Wade; and VP of IR and Treasury, Andy Kramer. I appreciate all of you for joining.

Andy, I'll kick it over to you real quick just for the safe harbor, and then we'll jump into things here.

Yes, absolutely. Thank you very much, and good afternoon, good evening, good morning to those of you who are joining. I'd like to remind everybody that today's discussion will contain some forward-looking statements that include, but are not limited to, the company's business operations, product road maps, financial performance.

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. Actual results could also differ materially from historical results and/or from forecasts. Some of those 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 3, 2026. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.

And so with that said, I'll turn the call and the event back over to you, Rudy.

Okay. Great. Well, Shiv, I want to start with you. I think a lot of investors really appreciate your message of accountability and the need to execute better on the earnings call, and that's kind of where I want to start. As you've been in the CEO seat for a month now, could you share just your learnings about the business as a whole and where the greatest opportunities for improvement and execution lie going forward?

Yes. Good morning, good afternoon, good evening to everybody, and thanks for hosting us. So yes, I spent the past month really a lot of the time was with customers and of course, our teams and leadership. And as you can imagine, I've also spent a lot of time with many shareholders, too. So we've had lots of meetings with that audience. And so some of this is really just a continuation of my first 90 days. And now obviously, I'm spending more time with some of the decisions that are really critical for our growth and making sure that we execute the quarter. So this -- look, stepping back, there's like a substantial opportunity for growth here.

I still believe, in fact, my conviction is growing as I learn more and more about our business and our customers. I think we have a really, really big opportunity to have a platform play and becoming a trusted investigative intelligence platform. So I still see the potential of this business growing significantly in the future and also delivering durable growth. So solid top line ARR and continue to deliver on free cash flows. So in terms of like key strengths of the business and some initial observations, I think really impressed by all of our teams. We have a deep technical bench in the company. Our leadership in digital forensics, and this really comes to life when you go talk to customers. So I spent some time in Europe and meeting some customers here in the U.S. and it's pretty clear that they are reliant on our products and services and really want us to innovate more.

So strong customer base, strong relationships and that we still have a very strong balance sheet. And I think our evolution is really just going to be moving from -- today, we're a collection of very critical and important products to becoming a trusted investigative intelligence platform. And so we want to continue to deliver our innovation that we started across AI and cloud, and we want to make sure that we deliver on this in the next quarter and then come back to our shareholders later this year to talk about our fiscal year '27 plans.

Got it. That's a great intro there. From here, I kind of want to go in order from your digital forensics business, which has been your core market, where the majority of your business is today and then into your workflow management, analytics and virtualization where you've launched new products. After that, we'll dive into the durability of growth and perhaps some other numbers-oriented questions.

So firstly, Cellebrite is the market leader in digital forensics for mobile phones. Is there an update on the competitive landscape you can share there? This has historically been a multi-vendor market, especially when it comes to access and unlocks and Cellebrite, historically, you've been stronger on Android, a bit of a leapfrog on Apple iOS. Just given the improved Android unlock capabilities, is that leading to any share gains with your customers who use both you and your largest competitor?

Yes. So a few things to think about the current digital forensics market, right? So when you -- especially the larger agencies that we have, they are more likely to have a multitude of tools and technology. So typically, they will have other vendors in there. They kind of have to, just given the nature of the work that they're doing. And -- but we've been a primary vendor for mobile phone extraction for well over a decade for lots of our customers. And you can see that, right, in terms of -- this reflects our strength across access, extraction and decoding.

And each phase of the examination is really important, and we deliver world-class capabilities in each of these domains. And we do have -- our coverage spans both Android and iPhone iOS, but a little bit about the space is it's a little bit of a cat and mouse game. There are times when maybe we have all capabilities for -- across all of these domains, especially unlocks and extractions and then sometimes our competitors rep. So it's kind of -- it's always shifting and changing. But from a market share perspective, which is what you asked me, we haven't seen anything in our data yet that we have lost any share. And so -- and at least from -- and everything that we track, we are the dominant player in the market. And so that's kind of where we sit and it is still a multi-vendor environment.

And then as of today, which we announced earlier, and this is why we have Chris on the call, we have -- we moved our Cellebrite Labs team under his leadership. He's been a domain expert here for a very long time. And so he's spending his time and additional investments to make sure that we continue to have all of the capabilities that we need for our customers across both iOS and Android. And maybe, Chris, you can add a little bit of color around some of these capabilities.

Yes. I think going back to what you said about the testament to our world-class capabilities, Android is extremely fragmented. There's hundreds of different OEMs making phones, and we lead the way with this. We have a phenomenal Android team. And now that I'm leading labs, we're going to continue the investment and expand adding capabilities on AI side. as well as expanding the team. And we ensure that we have the dominance on the Android side and start to push heavily on the iOS side as well.

Got it. And then, Chris, I was planning to segue to you next, but Shiv and Chris, both of you, I guess, here, like there's been a lot of investor questions around AI and potentially enhancing Apple and Android's ability to find and close off the vulnerabilities that you guys exploit to unlock those locked phones.

So firstly, there, any change in behavior from the Android and Apple OEMs? And then secondly, Chris, with you having Cellebrite Labs on the mobile research, just can you guys talk about just how exactly you're doubling down on that research and what exact initiatives you have in place to ensure that Cellebrite is a lock on phone regardless of what the OEMs do for many years to come?

Yes. We've seen something similar to this AI life cycle compression a few years ago when fuzzing became very popular. And you see this initial number of bugs like goes through the roof and eventually plateaus. But we noticed this compression, and we're using AI on our side. We've just made a heavy investment in hardware and software on the AI side to combat Apple and Google's use of AI.

The next 6 months are going to be very interesting as we see the models evolve, the frontier models just getting better and better. But what we've seen in the last few months is the rate at which new bugs are introduced hasn't gone down. AI hasn't stopped the fundamental problem of bugs in software. So we're seeing the vulnerabilities be patched faster, but we're not actually seeing a reduction in the number of vulnerabilities.

Got it. Super helpful. And then just coming back to the digital forensics more holistically, how much new logo and expansion opportunity remains in the digital forensics business? Or at this point, is it more about providing new digital forensics tools and technologies outside of the lab is -- and then it is still the majority of your growth today. So I guess just how much runway is there in that core digital forensics business?

I'll start quite a bit, and I'll tell you why. We really -- when I -- the more I learn about this business and go deep, we are really deeply penetrated today in what I call like the digital forensics labs, right? So very heavy lab focus. And a few years ago, we started this journey of starting to address other personas and ICPs. So we now have Guardian for investigators. But today, we do not serve prosecutors at all. So we have a very big opportunity here to expand to prosecutors.

Corrections facilities are also another -- there's another group of users there where we can provide workflow capabilities. And so just in public safety alone, we both have the opportunity to provide products that improve the investigative workflow. We have products that will serve entirely net new users. And then we want to add capabilities. I think especially with what we've done with Genesis and with AI, it gives us an opportunity to provide a cloud solution, which we have launched. And we're now also working on on-prem or air gap solutions for certain agencies and in specific geographies, they are not ready to use models in the cloud. And so providing a solution that respects their privacy or data rights or sovereignty, then those are amazing opportunities for us.

So I think there is quite a bit of wood to chop just in law enforcement and public safety. And then I look at like the other market segments, those are different. Federal is like a really big important focus area for us. We've been investing in with the FedRAMP High authorization. We have lots of opportunity in defense and intelligence. We're just getting started. We actually launched a product about 2 to 3 weeks ago, which was a tactical kit for field for combat in the field. And then we have some very interesting and unique capabilities today serving the private sector customers. It's a very small business today. But I think, again, we have lots of interesting capabilities, some of which include products from the recent Corellium acquisition we've done. So I think you will see a lot more when we go into next year, a lot more around how we plan to serve some of our private sector customers also. So those are kind of separate from our core public safety or law enforcement opportunity.

Got it. Okay. And then shifting to some of those new products you talked about, particularly Guardian and Genesis, but also Pathfinder maybe Corellium too. Just could you talk about the value your customers are seeing in those products, the technical differentiation, the barriers to replication and when you expect those products to become a more meaningful driver of ARR growth?

Yes. So let's start with each separately. So I think when you think of Guardian, Guardian really was our first move into starting to solve for different workflow needs. So moving away from just being a product that is used for extraction to now moving it beyond extraction into kind of the investigative workflow to provide evidence. And so there, when you -- Guardian really is really not displacing any other solution. It's truly -- it's really providing a workflow capability to what is typically a very manual process, like our customers really are moving USB drives and thumb drives around.

So Guardian really provides this amazing workflow, both from a storage and collaboration perspective, but then it also allows our customers to use Guardian to kind of digitize their standard operating procedures. So that's Guardian, and there are several modules that we're working on to expand that product set. Then when you think of Pathfinder, this is really a purpose-built on-prem solution. that helps customers analyze mobile phone data for crimes and events at scale. So think when you have to process lots of phones. And this has been really, really powerful. We have some really large public sector customers who have deployed these in different environments. And it's a more technically complex product because it's solving some complex use cases for our customers.

And then Genesis, which we launched earlier this year, just a few months ago on June 10, which is -- it's a product that's built from the ground up with Agentic AI at the core. And it can really analyze multiple data sources, including phone data to really help our customers get to actions or resolving specific investigations quickly. And so Genesis has really surprised us in many ways because when we -- when you go to customers and we say, hey, and they start using the product, which we also -- we're also testing something new here, which is we're testing a product-led growth motion. So you can have a 60-day free trial period and then customers upgrade to a paid version. And it's been pretty impressive. I see lots of notes from our customers where they conclude how the product helped them find new leads, how the product helped them get to actions much faster.

And then we're starting to see in some cases where customers will start small -- and then as they learn how they're using the credits, they are looking to expand further on our platform. So it's been really interesting to watch that because I think we have a lot to learn there and will certainly be an interesting -- there will be interesting data points there with regards to how they end up allocating budgets for this and also how much AI they start using in their day-to-day workflow. So these are kind of the 3 different products, and each of them are solving different use cases.

In the future, you will see all of these products ultimately combine to our Genesis platform. And then you will just get different deployment models with it, right? You can get Genesis in the cloud, you'll get Genesis on-prem. You may even get a version of Genesis on-prem with an FDE or forward deployed engineer because that's also something that we are experimenting with. So that's -- so there will be a convergence here of all of these products into the core Genesis platform.

Got it. Okay. And then I guess in terms of customer segments, defense intelligence, you already noted that earlier in this call. That was a strong grower in Q2. Just what's happening in that segment that is contributing this type of standout performance?

For D&I there -- well, we just have a lot of demand. As you can imagine, globally, the threat vectors are accelerating and devices and digital evidence are at the center of it. So a lot of the demand there has been -- we kind of address this market with our existing product set, which has been great, but we are also getting specific requirements from our customers. They want to see different form factors. They want the ability to have mobile labs in the field, including the ability to create form factors such that maybe everybody, every person who's in the military could potentially carry a Cellebrite device on them for the purpose of extracting intelligence and acting on it quickly.

So starting the second half of this year, we acquired SCG Canada for drone forensics. So that hardware product is coming to market at the end of this year in CFID v4. And we launched the tactical kit about 2 weeks ago, which is a purpose-built kit for the military. We have new portable kits in development, which we'll launch next year and including some prototypes of devices that Chris is working on, where they are more portable and anybody can carry those devices with them for the purpose of extracting intelligence. So I think we're being very purposeful in serving this market and are bringing very specific products to address the market needs.

I don't know, Chris, if you want to add anything with regards to the new hardware models that we're working on?

Yes. So we're working on, as you mentioned, field portable, battery-powered that don't require any kind of connectivity. They can run in offline or a cloud sync mode and have edge processing capabilities running SLMs on board. It's the first iteration of our next-gen hardware that we're actually designing in-house at Cellebrite. It will be the first piece of hardware that has been end-to-end designed by Cellebrite and manufactured in America. We're pretty excited about it.

Sorry. I want to come back to Genesis. Just double-click on the go-to-market strategy there. It sounds like the free tier is 60 days and then maybe convert customers just -- how is that going? How do you think about evolving that strategy going forward? And then maybe jumping the gun with a question I had for David later just on gross margins. How might that impact the gross margin profile with that free tier and the token-based pricing and things like that?

I'll unmute, sorry. So I think early signals from Genesis are pretty encouraging. I think we had highlighted that we have about more than half a dozen paying customers. And roughly at the last call, we said we're roughly at about $1 million in ARR on that product. And the adoption has been healthy and continued since then.

The other good news is we are actually starting to see customers in all major geographies and segments who are excited about this. And so -- and we still have a lot of capabilities to build out. So we have a pretty robust road map. We just did an update about 2 weeks ago where we released a bunch of new capabilities, including a capability called Deep Investigator. So that's been good. And then from a trial perspective, I think we're starting to see -- we continue to see a good kind of progression of trials and into -- and converting them into paid customers. And as we end this quarter, I think we'll have additional trends and insights to build on. But so far, the early signs are pretty encouraging.

Dave, do you want to talk about margins?

I do. Thank you, Shiv. Rudy, in terms of our margin structure, you started to bring together the free tier together with paid. And so let me break them back out for you. The way we actually structure is that the free tier does run through sales and marketing in line with all of our peers. And so that free tier is, in part, a commitment to our customers to ultimately adopt AI and also being a very mission-driven company, certainly, all of law enforcement want to make sure that they have access to it. And so part of our mission is just having a robust free tier certainly allows us to be true to our values in terms of making sure that we're doing everything possible to help our customers solve crime.

So that element will continue to sit in sales and marketing, and that will be a de minimis element of cost because when you have your hyperscaler contract, you can negotiate specific rates on sales and marketing versus R&D versus cost of revenue. Getting to the cost of revenue component, an AI workload is not as profitable. As you know, you're a great student of our company. We tend to run at about 85% or 86% gross margins. I don't think AI in its first rev will be at that level, no different than probably how cloud started off at a little bit of a lower gross margin. But I think overall, it will be very accretive to the company. And over time, I suspect that gross margin will continue to climb back up.

Got it. Okay. And then just maybe just one more going back to all these new products. Is there anything you can share about just like penetration rates with Guardian? Obviously, Genesis is super new. You said over half a dozen, we know it's very little penetration rate there. But Guardian, Pathfinder, Corellium, how early are you in kind of the cross-sell and expansion playbook with these products today with your customers?

Still early. So -- and I'll tell you what are some block -- what are some of the blockers there. So still very -- I'll start with Guardian. With Guardian, we obviously -- like we are not in all of the regions today, for example. So we want to expand in the regions that we're available in. So you will see increase in adoption with Guardian. We also ran into -- as we had mentioned on the call, with Guardian, we had run into for some markets, Freedom of Information Act. So adoption kind of stalled and was delayed, but we expect that to also ramp up.

Guardian is also relevant for the federal market. We didn't have the FedRAMP high authorization. Now we do. So that's going to open up the federal customers for us. And then when you think of like these different users in the case of prosecutors or corrections facilities, we are still building out those modules. So once we have those, we will see greater adoption in the customer base. Genesis is early, but we have launched some new regions. We announced those a few weeks ago, and we'll probably launch additional regions there, too, to continue to capture the market. So we expect that those numbers will continue to grow. But I would say still very low in terms of penetration. It's because we have some work to do on product and on geographies that we're serving.

Got it. Okay. David, I want to pivot to you. I got a number of questions here and really Shiv you as well on some of these. But software stocks, for most on the call know, largely driven durability of ARR growth and confidence in numbers. So I want to hit on both of those.

Firstly, durability of ARR growth. How confident are you that the 15% at the midpoint ARR growth guidance for this year is the floor for growth?

Well, I'll say it differently. But Rudy, we gave an outlook, and I think one of the key parts of our outlook was ultimately recognizing that we were seeing deal elongation. And so you saw the announcement this morning in terms of starting to get after deal elongation. One of the things that we communicated today was redomiciling the company. We think that ultimately has a lot of benefits commercially. That is certainly part of the road map almost as we go into next year of ultimately being able to capture that end market. And so I think we ultimately exercised a lot of prudence when we saw that deal cycles were elongating.

I think as we kind of communicated and again, as you've kind of tracked, we continue to sign deals and take down the opportunity because cloud and AI represent tremendous opportunities within public safety given the threats that are impacting our communities. And so I'd say we remain bullish on that opportunity. But I think there's certainly a lot of prudence and a lot of humility that went in. And again, I think as you started the call, we took a lot of accountability for Q2 and then ultimately our outlook.

Yes. And then maybe let me just throw a follow-up in there on the re-domiciling. Just can you talk about twofold there. One, process-wise, what is this going to look like, time line, just more details on the process there? And then secondly, you did call out some of those elongated deals, some of those extra loopholes you had to jump through because you were a foreign filer. How much will this redomiciling in the U.S. alleviate or ease those kind of sales cycles with large federal accounts?

We think that over time, it actually has a substantial impact as we go into the '27, and that's why we communicated on our time line that a lot of these activities that we need to perform along the lines of effecting and ultimately perfecting a redomiciliation take a healthy 4 months minimum just to get through the first wave, and then it will take several months thereafter. And so I think that's why we felt confident it would happen in the first half of '27.

Got it. Okay. Okay. First half. Got it. Okay. And then just going back to just where I was kicking off things on the durability of growth. Just what will be the drivers of stability or reacceleration of ARR growth going forward if you had to rank order across your product portfolios or other go-to-market initiatives?

Shiv, would you like to start? Or do you want to weigh in?

Yes, go ahead, and then I'll end.

Certainly. Yes. I think fundamentally, Rudy, when you look at the market landscape, I'd say, certainly, the element around the mobile device and everything that we're doing, certainly around extraction and collection. And I think what Chris hinted at in terms of the hardware as well as the software experience and how that continues to unfold, gathering larger and larger pieces of data. What was once 50 or 60 gigabytes is now getting to 0.5 terabyte of data that is starting to come in.

So the extraction volumes are incredibly high and incredibly rich and that ability to take that level of information and feed it into AI where it's getting enriched by 9 or 10 other data artifacts seems to be a big part of the growth of the company. And so unfortunately, our communities and ultimately, again, as Shiv highlighted, having mobility and being able to help operators in the field that are thinking about left of launch, that is a part of our mission. We take it very seriously. And as of right now, the world needs Cellebrite and the types of technologies we're introducing.

Got it. Okay. And I know it's likely too early or premature to talk about growth prospects for '27 with too much detail. But you've discussed that growth products should represent, I think, upper teens as a percent of ARR mix this year. How should investors think about the framework for growth entering 2027? What needs to happen, I guess, from a platform and road map perspective to sustain strong growth within those new product areas?

It's a great call out. I think you're right. We're going to add about 5 points of favorable mix, ARR mix in terms of the growth products kind of going from the lower teens to the upper teens this year. And so we think we feel really good about that because that gets to really your question around durability where the growth products become a progressively larger part of the portfolio. And so as we go into next year, one of the things we'll be talking about is the road map as we get into Q4, and we'll talk about when you can see some of these products hitting the market, and that will ultimately inform how we think about the growth, both in terms of the front half.

But equally, we're pretty excited about the back half of '27 in terms of once we have this product road map fully in the hands of our customers, how that starts to play out.

Got it. And then I guess, as you start to penetrate the installed base more effectively with newer products, is it your expectation that we could see improvements in gross retention rate potentially into the mid-90s over time?

Well, we have certain customer segments that will hang out in the mid-90s. And so our view is, particularly as we ultimately are able to sell a platform. And I think you saw last quarter, we saw gross retention climb a little over 1 point, almost 1.5 points. I think our view is the more we can actually serve a customer and have longer-term relationships, I think that actually naturally goes hand-in-hand with both a better gross retention, but certainly even a better net retention as well, just by virtue of the fact that when you have a 3- to 5-year piece of paper with a customer, as you have new products and new innovation, it's much easier to just attach that product onto that contract.

Got it. Okay. And then coming back to the just confidence in numbers. I mean, again, it sounds like a lot of prudence in this guide for Q3, but also the full year. Could you quantify any of the more conservative assumptions you made around close rates, pipeline conversion, et cetera, in the Q3 and second half outlook?

I would say, Rudy, the biggest changes that we made, we really looked at our deals and the deal cycle times. And then certainly, as you saw kind of coming out of Q2, we looked at concentration of net new ARR on some key accounts and tried to appropriately judge those where we said, gosh, while they're key relationships and they might be big 6-figure going into 7-figure or already 7-figure contracts, let's maybe moderate how much net new ARR we're contemplating, recognizing there's a base case and there's some upside cases. And so those are probably 2 of the bigger judgments that went into it.

Okay. And then what are the avenues to achieving Q3 ARR guidance? And more specifically, I guess, could you give some color around the opportunities in U.S. federal, the federal segment, in particular in Q3, just given that's the fiscal year-end Fed?

Yes, I think there are a couple of moving parts to the federal business. It's certainly how are the agencies splitting their money between actually and this is something new for us between September and December. So we're looking at how they're approaching spending the money for both this year as well as going into the next fiscal year, which some of them are spreading their appropriations across the 2 years. So that's kind of one dimension.

The other dimension is that we're also aware that through the One Big Beautiful Bill, there are grants that are pushing down to the states. And some of those grants will ultimately have effect in September, but some of those will have an effect in December as well. And so I'd say we're carefully monitoring with our customers that cycle time around deals and specifically when certain monies get spent in certain quarters. So I think there is a higher level of customer intimacy and just realizing that deal cycles were elongating.

Okay. And then going forward, how are you refining go-to-market pipeline hygiene, sales comp plans, forecasting, et cetera, to limit the risk that we have a repeat of Q2 where you missed the expectation on ARR and have to lower the rest of the year?

Well, I think we're going back to the basics. I mean the great thing about being in a vertical software company is you can count your customers. And so I think for -- as we think about '27, I think we're being very thoughtful when you have a population of 7,000 customers and you can cohort them specifically exactly the way you were thinking about it of D&I versus where we are with LEAs and certainly the enterprise, it allows us to naturally cohort our customers and think about our customer base expansion plan and ultimately how we intend to renew and expand our agreements. So we'll spend extra time this year really going through that renewal process of how we think about the relationships and then mapping it closely to the product road map that our R&D team has been fleshing out.

Okay. And then just your assumptions around adjusted EBITDA to free cash flow conversion rates, I guess, this year, you've made the comment, expect 30% plus free cash flow. But just any color on your assumptions around that conversion versus adjusted EBITDA this year?

I mean I think we're -- again, you're a student of the business. I think the back half of our business is always seasonally stronger in terms of that conversion and particularly how the EBITDA and the cash flow materialize. And so I think you saw that in the outlook that we provided in terms of comparing H2 profitability versus H1. And even last year, I think we had plus $80 million or so of free cash flow in Q4.

And so some of this is just linked to the way our contracts are structured in terms of when payments ultimately come to us. But I think we're still feeling good about the fundamentals of the business. And particularly for a year where we've taken on about 3 points of FX pressure that does move the needle in terms of how we thought about the overall expansion rates and then how we're thinking about the business for '27.

Yes. Okay. And then just for 2027, I guess, just your optimism around further progression in terms of profitability and free cash flow margins. So I guess, obviously, FX is a wildcard. It could swing either way. But that aside, I guess, your expectations there?

Well, I guess, for FX, the shekel isn't quite at its all-time strength, but it's pretty close. And so I think the amount of compression that we've seen in profitability, just given the strength of the shekel is -- it's hard to imagine it moving as much, it always could, but moving as much next year as it did this year is not, I'd say, a likely scenario. But we've absorbed that FX pressure, I guess, really going back to key drivers. Headcount across the business has been very flat as we continue to focus on AI.

And so I think that's going to be one of the elements that even if FX were to come up, I think the ability to continue driving automation using deterministic workflow agents or how we develop software, how we transact and go to market, I think all parts of the business will benefit from the investments we're making in AI. So that for me is probably a big structural driver where in any given year, you'd be normally growing headcount in line with revenue, and that's just no longer the case. So that piece will ultimately contribute substantial leverage.

Okay. And then Shiv, maybe back to you here, I mean, David certainly chime in as well. But just the update us on Sun Corporation. The ownership is obviously an overhang in the stock. I think it was about a year ago today. I think it was your guys' Q3 call, Tom made the comment, feel incrementally better about something happening in the next year or 2. When should we expect to see some kind of structured reduction in their ownership stake?

Yes. So I can go. So firstly, they've been a longtime supporter and shareholder of Cellebrite. And so we obviously appreciate that. But -- and we've started to see kind of change in their corporate governance. And so that's an area to keep an eye on. And while it's taking time, I think there are opportunities over the next 2- to 3-year horizon where there will be a structured and organized way for them to reduce their stake. So that's still being worked through, and we're fairly optimistic that, that will be the case. It might just take a little bit longer, but that work stream is in progress.

Is there any potential for this redomiciling in the U.S. to help accelerate that or have anything take place around that?

I don't think that this is particularly to accelerate that, but these are steps that certainly help towards that. So it's one of the many steps that we are orchestrating. But in and of itself is not the reason. I think the reason for redomicile is we want to continue to grow our U.S. business, and so it makes sense to be domiciled in the U.S.

Yes. Okay. We're coming up on time here. One thing I've heard this a number of times throughout this call is just the platform. And I know it sounds like we're probably going to hear more about this in Q4. But I guess, to date, for me, and we've talked about this, and David, between myself and you too, products aren't kind of separate products, but they are kind of each their own kind of stand-alone product.

I guess as part of this platform vision, do you envision having some kind of more cohesive product and packaging motion going forward where your customers can come in and they buy a package and they get these several products to kind of ease the friction of the product by product segment?

Yes, absolutely. And we'll unpack this and talk about specifics when we go into FY '27. But our North Star is to really become the trusted platform for investigations and intelligence-led operations. And we want to do that across digital data from across devices and sources. So today, obviously, it's mobile and drones, but there are other data sources. So expect us to procure additional data sources.

And then providing this platform that turns all of this into defensible evidence and mission-ready intelligence and informed action, right? So you're going to see the strategic shift from examiner-centric tools to this trusted investigation intelligence across public safety, federal, D&I and enterprise. And then the way you will -- our customers will experience the platform will be in the form of different deployment models. So I talked about the cloud version, you will have an on-prem airgap version, and you will have a field version. So like think of a mobile lab or a device that you can carry on -- carry with you that is portable.

So the product will be experienced in different deployment models, but that's kind of our platform story, and we'll be talking a lot more about it. And then finally, tied to that, there's an opportunity here also to package our products better than we have. And so thinking about platform licenses and all of the usage-based models that we have now, we could package those differently. So lots of work to do there, and you'll start seeing some of that next year.

Okay. We're looking forward to hearing more about that as the year progresses. We're up on time there. So we'll go ahead and wrap it up there. Shiv, David, Chris, Andy, I appreciate all of you making the time for this today. It was a pleasure to have you guys, and have a great rest of your day and week.

Rudy, thank you so much.

Thanks.

Thank you, everyone. Take care.

Thanks. Bye-bye.

Welcome to the Cellebrite Second Quarter 2026 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer. Mr. Kramer, the floor is yours.

Thank you very much, operator, and good morning, everybody. Welcome to Celebrates Second Quarter 2026 Financial Results Call. I'm joined this morning by our primary speakers, Adam Clammer, Cellebrite's Chairman of the Board. Shiven Ramji, Cellebrite's new CEO; and David Barter, Cellebrite's CFO. Shiv, Dave and Marcus Jewell, our CRO, will participate in our Q&A session. 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 transcript. Please note that today's press release and financial statements, including GAAP to non-GAAP reconciliations are available on the Investor Relations website at investors.cellebrite.com. In addition to the press release, we posted a separate investor presentation that provides an overview of the business and our recent financial performance.

I'd like to remind everybody who's listening on the webcast that the slide in your webcast viewer is a placeholder only. There are no actual slides to accompany the prepared remarks. We also published our historical financial information and supplemental data for the first 2 quarters of 2026, each quarter of 2025, along with the full year of 2024 and 2023 on our Investor Relations website. Additionally, unless stated otherwise, our discussion of our second quarter 2026 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 over the comparable periods of 2025. I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's business operations and financial performance.

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. Actual results could also differ materially from historical results and/or from forecast. 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 3, 2026. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. And with all that being said, I'd now like to turn the call over to Adam Clammer.

Thank you, Andy, and good morning, everyone. As you saw in this morning's release, our Board has appointed Shiven Ramji as Chief Executive Officer effective today. Before I go further, I want to take a moment on behalf of the entire Board to thank Tom Hogan. Tom joined Cellebrite 3 years ago, as Executive Chairman, and we're incredibly appreciative of his impact. Since taking the reins as CEO last year, we further accelerated our platform strategy, expanded into new markets and adjacencies through both organic development and acquisition and build a stronger foundation that positions this company well for the next chapter. Very grateful for everything he's contributed and pleased that he'll continue to support Shiv and the Board as an adviser.

I know many of you will ask why Shiv and why now? And this is something the Board has thought about carefully over time. Even after Tom became CEO, the Board recognized that his tenure would likely be limited and Tom candidly acknowledged that himself. A key priority has been to make sure the right talent was in place around him to carry this company forward and Tom played an integral role in recruiting much of the current leadership team. When we brought Shiv on board, it was with the clear understanding that he was for all intents and purposes positioned to be Tom's successor. Shiv ramped much faster than we initially expected, the pace at which we need to build and compete is accelerating. And we believe that's best driven by a product-centric leader who is rooted in architecting scalable, cloud-native platforms that can maximize the impact of AI which continuing to rapidly scale.

We are seeing tangible signs that this represents an enormous opportunity for Cellebrite. And the team was emphatic on the last quarter's call about that. Given this backdrop, we felt it was important to make the change now. Looking ahead, my optimism about Cellebrite's future has not wavered. We have a large and growing healthy market. Trusted relationships with virtually every major public sector agency in the democratized world, a differentiated platform and a world-class team that is squarely focused on turning our domain expertise and technology into durable profitable growth. And although this year will be choppier than we would otherwise have anticipated, the platform strategy is working. Growth is increasingly coming from our new products outside of extractions and unlocks. We are well positioned to build on our progress, given these new initiatives and customer adoption. And with that said, I'll turn it over to Shiv.

Thank you, Adam, and good morning, everyone. Echoing Adam's comments, Tom's partnership over the past several months has meant a great deal to me, and I'm grateful for the foundation he's helped build. Cellebrite continues to make a real consequential impact on public safety around the world, and I see a genuine opportunity to build on that. Because regardless of customer segment, the fundamental challenge is the same. How do you compress the investigative life cycle and rapidly obtain trusted insights and actionable intelligence.

Given our core competencies in digital forensics and our intimacy with customers' workflows, and our accelerating investments in on-premise capabilities, edge, cloud and AI, Cellebrite is uniquely positioned to turn digital data from any device, any source or environment into actionable, court approved and mission-ready intelligence. All of us here are committed to the hard work and disciplined execution required to enhance our platform and expand our business around the globe. I am excited about the opportunity ahead, but today I want to start with where we are.

We did not deliver the ARR and revenue performance we expected in the second quarter. On our last call, we expected a meaningful acceleration in Q2. That acceleration did not materialize at the level we anticipated and we own that. The media shortfall was concentrated in a limited number of large transactions that we expected to close in the quarter, but ultimately moved beyond our anticipated time lines. It's worth noting that for some of these transactions, particularly with U.S. federal and European government customers, we encountered new and additional administrative and procurement requirements related to our current foreign entity status. Additionally, we are also competing for increasingly large and strategic opportunities that now incorporate cloud and AI.

These deals involve more stakeholders and, in some cases, longer procurement cycle. But I want to be clear, timing is not an excuse. We need to execute these opportunities better, identify risks earlier and forecasted business with greater precision. Another factor impacting performance involves our Insights digital forensic solution. To be clear, we continue to make good progress converting customers to insights, reaching nearly 65% of the installed base by the end of Q2. However, the ARR uplift from pricing and footprint expansion has been lower than we expected, particularly in the U.S. state and local government sector. So taken together and considering the timing of several product introductions in the second half, we believe the responsible action is to lower our full year ARR and revenue outlook.

At the same time, we are raising our full year adjusted EBITDA target, reflecting continued discipline in how we manage the business and prioritize investments. Dave will walk you through the outlook in more detail shortly -- the question I want to address next is straightforward. What do we need to do differently? And our 2 immediate priorities. First, we are raising the standard for sales execution. We have completed a bottoms-up review of our pipeline and our largest opportunity. We're putting greater rigor around qualifying opportunity, customer commitments, procurement milestones, executive sponsorship and cross-functional ownership.

Second, we are tightening our forecasting discipline. Pipeline is not performance. Going forward, we will place greater weight on observable customer actions based on the current environment. And within that construct, we will also more explicitly account for the timing and magnitude of prospective large transactions with major government agencies. None of the disappointment around the quarter or the year changes my conviction in the opportunity in front of Cellebrite. There are a number of positive signs that our strategy to broaden our platform and extend our reach beyond our technical digital forensic user base is, in fact, working. Our U.S. federal business had a solid second quarter, and the Defense and Intelligence ARR grew 25%. Our platform is compelling for these customers, and we are now pursuing some of the largest opportunities in the company's history.

Our newer offerings are also increasingly contributing to our ARR growth. We saw important adoption of new solutions like Guardian Investigate, Advanced Unlocks and Drone Forensics in Q2, all of which occurred in their first full quarter of availability. Earlier this week, we secured our first major FedRAMP deal for Guardian with 1 of our long-standing U.S. federal customers as part of a multiproduct multimillion dollar deal. This customer placed an initial 7-figure order for Guardian alone that is nearly 35x higher than the average annual spend of roughly $50,000 by SLG agency on Guardian. Genesis, which launched on June 10, generated more than half a dozen customer wins before the end of the second quarter, and that progress has continued into the third quarter.

We are pleased to see local police departments, major metropolitan agencies, district attorneys and correctional organizations among the early adopters. Just as important, trials have continued to expand into Q3, and we are extending availability beyond the U.S. into the U.K., Australia and Europe. These are all encouraging signals. But I also want to put them in the appropriate context. Innovation, customer interest, pipeline and product adoption only matter if we consistently convert them into ARR revenue, profitability and ultimately cash flow. That is the operating discipline we will prioritize moving forward. At the strategic level, the opportunity in front of us is much larger than any specific individual products. Every customer we serve is trying to solve essentially the same problem. Compress the investigative life cycle and move from digital evidence to trusted, actionable intelligence faster.

Cellebrite has a unique foundation from which to solve that problem. Deep expertise in digital forensic, extraordinary access to investigative workflows and data and growing capabilities across cloud and AI. Our ambition is to connect those capabilities into a broader investigative intelligence platform that can securely turn digital data from devices, cloud sources and other environments into trusted insights customers can act on. And AI will be an important part of that. We are building a shared Cellebrite AI layer designed specifically for digital investigation. Combining forensic context, models and agents with evidence grade controls around provenance, verification, auditability and human oversight.

The outcome we care about is not AI for its own sake. The payoff is measured in time, quicker time to evidence accelerated time to insight and ultimately, faster time to action and justice. In the second half, our priorities include enhancing and expanding Genesis. This includes bringing this capability into high security and on-premise environments, and we have already secured an agreement with an anchor customer for an airgap offering. We also plan to extend Carillium into additional law enforcement and enterprise vertical use cases and continue advancing our drone forensics capability. We will invest aggressively where we see the potential for durable growth, but we will do so with discipline.

I'll close with a couple of personal comments and observations. First, I want to thank all of our Cellebriteors who take our mission very seriously and are working hard to deliver on another important quarter. Your energy and efforts are truly appreciated by the leadership team, our customers, and our shareholders. In terms of our product and technology organization, [indiscernible] a seasoned Cellebrite product and engineering executive, will assume leadership on an interim basis until we complete our search for a new leader. Throughout my career, I've been fortunate to build successful technology platforms or businesses that created access opportunity and better outcomes for people. What drew me to Cellebrite is that the impact here is unusually tangible.

Inside every device and within every piece of digital evidence is a human story, a family waiting for answers, a victim seeking justice, an investigator trying to stop the next crime and a nation working to protect its citizens. For the better part of 20 years, Cellebrite has earned the trust of its customers when the states are the highest and involve some of their most consequential missions. That trust is something I take very seriously. This was not the quarter we expected and we have work to do. As CEO, I accept that responsibility.

My commitment to our shareholders is straightforward. We will confront issues early communicate clearly, allocate resources with discipline and continue earning your confidence by setting realistic yet ambitious goals and achieving them through relentless consistent execution and results. I am confident in the opportunity ahead, and I'm energized by the work required to realize it. With that, I will turn it over to Dave, our CFO.

Thank you, Shiv. Q2 represented a quarter with some puts and takes. ARR increased 21% to $508 million, but we missed the bottom end of our guidance range. We are committed to executing better, and I believe we will. As I look beyond the execution, it's important to keep in mind that business model transitions are nonlinear. We have made great strides converting our customers to insights. Equally, we are making great strides with regard to cloud and AI. Our business will become stronger and more durable as customers adopt more solutions across our platform. We are also encouraged that our growth products contributed 25% of the $15 million of sequential ARR increase versus 18% last quarter. .

Drilling down, our investment in new products continues to reinforce the value of our platform strategy. This was the first full quarter of availability of our advanced unlocks and Guardian investigate solutions, each contributed meaningful levels of net new ARR and opened up higher levels of spending. For example, given the volume of evidence stored on Guardian Investigate combined with its AI capabilities, it's a product that commands increased price versus Guardian forensics. Another highlight was Genesis, which we launched late in the quarter. The early signs of product market fit are strong. We secured about $400,000 in ARR in the final weeks of June.

This product was launched as a consumption product, which provides customers with the flexibility to use as many tokens as they need to compress the investigative life cycle. The initial deals indicate this product will be accretive to our gross profit and P&L. Let's take a look at ARR by geography. The Americas represented 53% of total ARR EMEA represented 34% and APAC represented 13%. In terms of growth rates, the Americas grew 19%, EMEA grew 23% and APAC was a standout performer with 29% growth. Looking a bit closer into the Americas, growth in U.S. Federal accelerated into the mid-teens after being flat at the end of 2025.

As Shiv noted, the changing dynamic with insights where customers continue to adopt but we are not capturing as much price and expansion at the time of conversion was most evident in our U.S. state and local government sales group. Last year, this group delivered growth in the mid-20% range. The growth is now just below 20%. Fortunately, we are starting to see the benefits of new product introductions. Without those new offerings, state and local government growth would have been in the mid-teens. Turning to revenue. We reported $131 million, up 16% year-over-year. Subscription revenue was $119.5 million, also up 16% and represented 91% of our total revenue.

Our Q2 gross profit increased 16% to $112 million, which represents a gross margin of 86%. Second quarter adjusted EBITDA was $31.8 million, a 24% margin. Our profitability continues to be impacted by a challenging FX environment. Headcount was 1,287 employees at the end of June, which is basically flat with the end of fiscal 2025. We reported second quarter operating income of $29.8 million and net income of $29.7 million or $0.11 on a fully diluted basis. Looking at the balance sheet, we ended the second quarter with $546 million in cash, cash equivalents and investments. For the trailing 12 months, free cash flow was $144.2 million or a 28% margin. Our free cash flow performance reflects the impact of deal structures as well as collections that came in late during the first week of July.

As a reminder, our free cash flow last year benefited from a onetime tax refund of approximately $9 million. Overall, we feel good about the underlying free cash flow dynamics and anticipate a stronger overall trend line in the second half of this calendar year. Let's turn to our outlook. We've lowered our full year 2026 ARR guidance range to $550 million to $560 million, a reduction of $15 million at the midpoint. The change to our second half now assumes net new ARR for the second half of the year that is essentially in line with fiscal 2025. There are several primary factors for this change. The outlook reflects moderation in insights conversions, specifically the incremental price and expansion at the time of conversion. There is greater prudence in regards to deal timing due to the administrative requirements we discussed earlier that are elongating deal cycles.

And finally, we've removed potential upside from larger, more complicated deals where sales cycles are longer and less predictable in the current environment. Our recent FedRAMP win was a great example of this. It required multiple waivers, security reviews and other administrative approval that in the end, made it difficult to forecast when exactly this deal would close. I'd like to take a moment to bridge our updated outlook for 14% to 16% ARR growth with the growth framework we've previously shared. First, we still expect winning new logos and capturing incremental price will generate several percentage points of growth. Second, we now anticipate that insights will contribute mid-single digits. The third growth driver, Guardian, Pathfinder and Genesis, the cornerstones of our digital investigation and analytics offerings will grow at the lower end of our original expectations in the mid-single digits.

We also moderated our expectation for Corillium's contribution to 1 to 2 percentage points. And finally, we remain comfortable about finishing this year with at least 1 point of improvement in our gross revenue retention rate given our performance in the first half. Given the lower ARR range, we've reduced our full year revenue range to $555 million to $561 million, which represents growth of 17% to 18%. We've raised our adjusted EBITDA targets to $153 million to $159 million, which represents a 28% margin. It's important to highlight this outlook contemplates the business absorbing nearly 3 points of FX headwinds from the ILS. We plan to manage our capital allocation thoughtfully while we continue to fund investments critical to durable long-term growth.

We remain well positioned to deliver 30% free cash flow margins in 2026 as we move into the seasonally stronger second half of the year. We are increasingly optimistic about our potential to deliver the next step-up in our profitability and free cash flow in 2027 as we demonstrate that we can operate the business without material expansion of the headcount, the FX headwind subside, and new products continue to scale. Our third quarter expectations are as follows: We anticipate ARR in the range of $524 million to $528 million representing net new ARR of $16 million to $20 million. We expect third quarter revenue in the range of $145 million to $148 million, and adjusted EBITDA in the range of $42 million to $45 million or a margin of 29% to 30%.

I'd like to close our prepared remarks by reiterating that reducing our growth expectations is prudent in light of the transitory headwinds we've encountered. We don't take that change to our guide lately. There is a lot of good happening beneath the headline numbers. Federal is reaccelerating. Defense and Intelligence is outgrowing the rest of the company. and AI and our Genesis product is off to the strongest start of any product we've ever launched. We remain confident in the long-term opportunity in front of us. and we're focused on executing through the back half of the year to deliver on our updated outlook while setting ourselves up for long-term success. Operator, that concludes our prepared remarks.

Thank you. The floor is now open for questions. [Operator Instructions] Our first question today comes from Shaul Eyal with TD Cowen.

Thank you. Good morning, everybody. Shiv or David, listening to the call, I wanted to ask what gives you the confidence about the growth potential of the business? And I have a follow-up. .

Yes, I'll start. So I think of this year as more of execution reset, not a reset of our long-term growth potential. Like I said, we are seeing good early signals from the work that we're doing in product and also the deal sizes that we are now entertaining. So over the long term, obviously, we are optimistic about the potential of the business, but being prudent about what -- how we execute and over the next 2 quarters. David?

Let me offer a little bit of perspective. I mean when you put the quarter in context, we signed and took down orders probably well north of 1,000. In the end, it kind of came down to 4, and it was 4 that across the line, and it was 4 that involve cloud. It was 1 in particular in Volta platform. You might recall, 1 of these deals, we alluded to last time where they actually called us before we had FedRAMP approval. And even they were a little bit surprised about the changing procurement requirements when you get into cloud and AI and the approvals that we had to secure. And so to be in that spot where a platform order came in, we sold 5 products.

Originally, they were just renewing 1 product, and they bolted on 4 more to it, and sort to have a solution like that with a leading agency that's on the vanguard of cloud adoption. I think that's what gives us confidence. I think we've seen cloud transitions and cloud adoption work well in every other part of the economy. There's no reason why it doesn't work well here. The fact that they're adopting cloud, they're adopting AI. And even as Shiv alluded to, we have now customers that are kind of going into on-prem which is a pretty quality -- contemporary and quality business model gives us the encouragement and the confidence.

Understood. As my follow-up, I'm curious with respect to some of the slippage you've seen in EMEA, maybe like in EU countries, and some of the administrative requirements you've mentioned in your prepared remarks. Can you maybe provide us with more color maybe slightly elaborate on that? .

Sure. It's Marcus. Yes, I'll answer that. So in EMEA, we faced a slightly different challenge, which was based around freedom of information. The growth that we have in EMEA that we wanted in Q2 comes from transitioning major European customers, both in Germany and the U.K. to cloud. That required an extra level of vigor that was not made apparent to us at the start is that as information moves into the cloud from investigations that a new EU law is applied for Freedom of information, which meant there was an audit to make sure that any information that we store and process is kept out not only in a sovereign location, but equally as a vendor that we are normalized, we do not get to see that.

That was a surprise to both our customers and us, and we had quite a difficult process with legal review to get through that. The good news is we secured 4 of those slip deals already in the quarter, actually all 4 for the cloud. And we now feel confident that we know how to deal with and respond to the CIO's requirements for freedom of information. So that was the explanation for EMEA.

Our next question comes from Mike Cikos with Needham .

On the Defense and Intelligence growth, can you help us by maybe quantifying the magnitude of these elongated sales cycles that you're seeing as well as the conviction you have in the growth from where we sit today over the remainder of the year? And then I just have a quick follow-up. .

Sure. So it's Marcus again. Thanks for the question. Great question. So in defense and intelligence actually delays are less. We actually feel confident about our ability and the nature of those deals, particularly in defense [indiscernible] continues. The delay that we'll call out was more in the civilian side of the federal business, and that was down to 2 things. The first 1 was I have to be honest, that the agencies as they move to cloud and AI do not necessarily have the correct procurement tools to understand exactly how to do that, and you're going to see that message for trade, I think, across a number of vendors. We have a particular additional requirement, which is as a foreign filer, we found that we needed to find other permits, which was new.

Our sponsor is a very high-level CIO in the departmental level, was not even aware of something called an FEP, which is a foreign entity permit requirement, which is applied to cloud technology. Since learning that and learning that process, which created a 4- to 5-week delay we managed to secure a master FEP, which means that at a departmental level now, we'll be much more expedited in the processing of our orders. So I want to clarify the DNI is not a slowdown as federal agencies, which are using this cloud transition.

And maybe a question here for Adam. I just prefer to ask you -- if I rewind the clock a year ago, it's when we were saying that Tom was going to be named the CEO, he was the preferred choice. But we're now appointing Shiv here effective immediately, which is part of this planned transition you guys are citing. But admittedly, at least from the external side, we didn't have insight to that. So first, can you can you walk us through like that planned transition?

And then secondly, how is the team internally handling that level of change management if I'm thinking about retaining personnel and just the turnover we're seeing in the CEO seat.

Mike, it's Andy. I'll just preface that the Q&A, it was pretty explicit that Shiv, Dave and Marcus would leave the Q&A. I don't even know that, that I was connected at this point in time. So I understand -- we understand the question and we'll endeavor to connect to. But I'll just ask Shiv to provide a little bit of color and perspective there.

Yes. So as Adam had mentioned, this was a planned transition, and both Tom and I have been working on this. And we just accelerated the transition given the opportunity we see with the products in the markets we're operating under. So it just got pushed up much earlier than initially.

Well, Adam is here, and I'm happy to just echo what Shiv said. This was something that when Tom when in his CEO, which we were excited about, and he was excited about he and we and the Board understood that we would start looking for a product-centric CEO and it might take some time to find that person and it might take some time to ramp that person so they could assume disposition. It happened sooner than we all expected. And it really happened with the full support of the entire management team. So we're delighted that all of the direct reports are excited and supportive about Shiv going forward.

We'll take our next question from Rudy Kessinger with D.A. Davidson.

It sounds like in the quarter, there was a number of maybe procurement and permitting and just things of that nature that caught us by surprise. As you look ahead, I guess. Have you done a thorough review, I guess, across regions and agencies, the governments, et cetera, to ensure that there aren't more surprises potentially that you'll uncover in future quarters? And just any color on why in hindsight you guys didn't have your arms wrapped around all of these procurement requirements going into the quarter?

Sure. Great question. This is Markus again. Look, you don't want to be a CRO in a public company with a miss. The first thing, we own that. And of course, if I had known these things upfront, myself and my team, which I believe is an excellent team, would have doubled them. I would say we were in an unprecedented situation as we transition to cloud and AI, where we're having unforeseen things thrown at us. why we feel confident going forward is we have taken a different approach to the rubric that was faced to us and make sure we've applied that logic to our deals going forward, and being incredibly rigorous in making sure that the procurement process and understanding the full entity of the procurement process is now completely understood not only the U.S. government, but also in EMEA and APAC level. .

We believe with the highest level of working with some of our lobbyists that we now fully understand the mapping of how USG and EMEA is going to apply to us as a foreign filer and we are now confident that we won't repeat the same issues going forward. And we now have precedent, which is the best thing that we can show evidence to other agencies and other buying entities of how we've been able to transact and met all the requirements of a thrown at us. So what I'm saying is, I think we've learned our lesson, but we're also being prudent in our own to take in consideration that there could be delays.

And we'll take our next question from Jeff Van Rhee with Craig Hallum.

This is Daniel, on for Jeff. Maybe we could just open Shiv, I'd love to hear a little bit more in terms of your background. And just if you could speak to what attracted you to Cellebrite, the opportunities you see? What's brought to you here?

Sure. So I mean, for me, this starts with the mission that Cellebrite is focused on. I think what the company has built, the assets that we have is truly impressive, and the mission is really, really important. We play a very, very important consequential role for our customers and in their investigation. So I think first was just like the mission is very attractive and very impactful. And I think of Cellebrite has like really amazing assets. I mean, this company is -- we have a hardware component to our business, we have a cloud component now that we've just talked about. AI is now helping us deliver outcomes and capabilities into initial early adopters, and you can see the customer feedback that we're getting from them. And then what we can do in DNI is really, really unique and special with obviously our hardware offerings and offerings at the edge.

So for me it was just really exciting to see that we have this amazing technology and assets. And if we can weave all of those together to essentially build an autonomous investigative platform that we can continue to grow this company at a pretty significant pace. So I firmly believe in the long-term growth and opportunity. And we're making steady progress towards those, and as we continue to deliver those outcomes and continue to deliver those results, continue to deliver performance from the vision that we have. I think all of you will also come to appreciate what what attracted me to this company.

And our next question will come from Brian Essex with JPMorgan.

I have 2. One is, I'd love to know a little bit more about the challenges that you saw with insights conversions and the pricing coming in lower. What percentage of the business does that account for? And if you could just help me understand how those transactions materialized during the quarter? And then the second would be it seems like things are falling nicely in place for the federal business. You guys acquired Cellebrite Federal a while ago, you got FedRAMP certification. It seems as though the people and the processes are in place for which should be, I think, a pretty good federal quarter. Dave, I'd just let you know how your assumption -- what are your assumptions for business and contribution in 3Q? And what can we expect near term for the federal business? That's it for me. .

Thanks, Brian. Great question. As you -- I mean, you're a pro and you're an expert on the business. We're driving right now. And I think we've kind of indicated that overall between extractions and unlocked by the end of the year, that would be about 80%, 81% of total ARR. And I think as you probably recall, in any given quarter when we run the insights, we get a price uplift that can be $1 million to $2 million of incremental ARR, maybe even some courses, a splash more or splash less. And so what we're really seeing, Brian, as people progress through is, ultimately, we got less of that price increase. And then ultimately, we were just buying in terms of quantity, they just at the time of migration, which the migration or conversion we're about from a magnitude perspective, almost exactly where we were last year, we were just capturing ultimately a little bit less.

And so that really just started to weigh on our view. And I guess I looked at it through the lens of almost every business model transition or migration where at a certain point in time, it just the expansion rates start to shift, and we certainly started to see that shift. So that's kind of really what unfolded there if that's helpful. Brian, do you want me to double-click a little bit more? Is that helpful context, if not all kind of.

It's super helpful. I appreciate it. Yes.

And by the way, I mean, one of the other dimensions, maybe that's worthwhile is just overall, we did see gross revenue retention continue to climb in the first half, actually on insights, it was up several points. And so I'd say I feel really good about those who have converted and the stickiness of those relationships. I'd say on the federal side, is Marcus and I have looked at the business, I think 1 of the areas that we did was actually spend more time handicapping and I'll use that recent Fed ramp win as an example where ended up being a nice step-up in terms of net new ARR. But I think we've really handicapped I'd say some of the larger transactions knowing the time frame. And so I'd say we kind of looked at -- this is why I expanded the range as we thought about the outlook to be able to say fundamentally, we're going to start to contemplate a smaller contribution from any given deal, knowing that these have the ability to be larger cloud and AI deals.

And so we just wanted to be a little bit more humble. And so I think when you look at it, and this is why we kind of looked at things through the lens of last year, with net new ARR being roughly flat year-over-year is that we're kind of counting on the contributions being roughly about the same little bit more probably in the D&I world than we saw in the SLG world given some of the dynamics that we described, but in aggregate, about flat with what we saw last year. And we think that's a prudent way to look at the business. particularly when we handicap transactions. Marcus, is there anything else you...

Again, we have to take a prudent view of where we are, but we believe that our federal business as noted, is set up incredibly well. We remain -- 3 things I want to remind, we remain with the only FedRAMP high solution for digital forensics available. And the process to get that is a very long and tortuous process. So even though people are announcing they are going for that, they will take an extended amount of time. The second thing is, as you probably know, if you follow the public record markets, the grants are starting to flow. There is the OBB, it's also known as the Biden money, which affects both state and local and federal, and we are confident that we'll see some wash in that business.

We also have submitted and actually been short list before our first ever 9-figure program, and that is in the public market as well. So the leadership team there under Phil and Alan are exceptional, and I feel that they will deliver very good results for us going forward.

Our next question comes from Bhavin Shah with Deutsche Bank.

David, I just wanted to double quick on Brian's question there just in terms of the uplift you're seeing on the insights migration. Like why is it coming in lower than what you might have seen a year ago? Is it just like the most needy customers maybe were migrating earlier? And now we're at a point where, hey, it's people that might not need as much as a platform? Is it something competitively that might be changing? Are they using less unlocks? I just wanted to really understand and appreciate kind of what's happening with this this customer cohort? And how do you ensure this doesn't happen to the remaining 37% of customers as we kind of go down the staff.

Totally. It's a great question. I think you've certainly seen with this cohort, you're seeing a little bit more of a conservative posture in terms of how they approached it. And so I think fundamentally, there's a couple of dynamics. One, you're getting to the maturity of the cohorts. And so some of these customers have been buying some of the legacy products over time. And so if you go back in time, the legacy premium or the legacy Fed and so some of them are just, quite frankly, better deployed. And so that's kind of 1 dimension that's certainly going on. I think there's another dimension where certainly as we see the adoption of more products, whether it be the adoption of Guardian or as we saw Genesis starting to go into the base, we are seeing people have the ability to choose more to buy.

So there's a few different dynamics that are playing. Again, I'll kind of reinforce GRR is up, GRR for Insights is up several points. And so I think we are when you're starting to climb towards mid-90s on a product level, particularly when people are buying on an annual basis, I think we feel like we have very positive momentum there.

Thank you. We'll take our next question from Eric Martinuzzi with Lake Street.

Yes, I wanted to dive in on the initial deals that you had with Genesis. If you could walk us through the types of customers; obviously, the early adopters representing that of $400,000 worth of ARR that you did book in Q2. Who are those, is there anything you can kind of categorize those early adopters into? Because I imagine for A lot of your customers is an annual budgeting process. And if it wasn't in there at the start of the year, it's going to be hard to sign up for it now. .

Great question. So I'll take this one. So it's a broad church. So the good news that we're seeing there is we have secured business international level for leasing. We have secured business at a state level AG. We have actually secured business in the enterprise. And so what we're seeing is a very broad church and the momentum of conversion is accelerating, and the number of trials is accelerating to a great level. We don't see any common use case, which is dominating in a minute. We're actually seeing it because of the very nature of an open-ended model with LLM integration allows us to cover pretty much all the markets. So as this develops, we will clearly inform you any patents we see forming. But at the moment, we see spreading across all of the markets that we exist in. .

Eric, I might offer just in terms of how you think about the business. We have had some customers go from the pilot, and they might start off with I think the smallest order might be 6,000 or 10,000, and then we've had some customers up towards 200,000. And so now that the business has as I shared, it wrapped up at about $400,000 and now it's pushing $1 million of ARR. We're starting to see some maturation around how people are adopting, particularly as they've been using the free trial, consuming at pretty heavy levels, and as they open up budget and create opportunity, they're inviting in some interesting quantities. So again, I think it's overall -- it was nice to see how it monetized over the course of a couple of weeks. And 5 or 6 weeks since we closed the quarter, the monetization has continued. And again, we see good activity both in the free trial, but also at the paid level.

I think it's worth adding is our leading consumption product. It gives us the chance to upgrade in cycle extensively. So whereas in state and local and federal, you'll normally stock to your 1 year or your 3-year bid value here, what we're seeing the ability to actually do product-led growth as well and upgrade within cycle. So the monetization is much more dynamic than products we've had previously. .

And we'll go next to Jonathan Ho with William Blair.

Can you quantify the size of the pipeline deals lost? And how much is maybe subsequently closed already, and also, I guess, 1 thing I wanted to better understand is how to quantify how much these complicated deals have actually elongated the sales cycle? Like are we talking about multiple quarters here? Just want to understand some of the dynamics there. .

I can give you 3 very good answers here, I think. So the first thing is the easy one is, no deals or loss. We didn't lose any business throughout this process. of the business which slipped as we sit here today, $4 million of that has now closed and booked, which has obviously made our Q2 very different. The elongation is approximately 6 weeks to the sales cycle is what we've seen. So hopefully, that's 3 [indiscernible].

[Operator Instructions] And this will conclude today's Q&A portion of the call. I would now like to turn the floor over to Andrew Kramer for additional or closing remarks. .

Great. Thank you very much. I'd like to thank everybody for joining on today's call. We look forward to speaking with you in the weeks that follow, We will be at a couple of investor conferences over the next couple of months. Look forward to seeing you there as well. Thank you very much and until we speak again. Have a good day.

Thank you. This concludes today's Cellebrite Second Quarter 2026 Financial Results Conference call. Please disconnect your line at this time, and have a wonderful day.

Welcome, and thank you for standing by. I would like to inform all participants that this conference call, as well as any Q&A, may be recorded. Where a company is presenting, any recording may also be posted on their website. Views and opinions expressed by any external speakers on this call are those of the speakers and not of JPMorgan. Parts of this conference call may be reproduced in JPMorgan research. Participants are prohibited from posting, sharing or distributing any part of this call or its content on social media platforms or any public forums without prior written consent from JPMorgan. If you have any objections, you may disconnect at this time. Members of JPMorgan Global Banking Department may be present on this call. Your host will now begin.

Great. Thank you very much. Good morning, everyone. My name is Brian Essex. I cover large-cap, smid-cap software for JPMorgan. And we're excited to have the Cellebrite team with us for a tech talk.

We have Chris Wade, the company's Chief Technology Officer; Shiv Ramji, the company's President of Product and Technology; Evyatar Ramot, Head of AI Innovation. And then over there on the side, we have Andrew Kramer, VP of Investor Relations and Treasury; and we also have Dave Barter, the company's CFO. So thank you all from Cellebrite for joining us this morning.

Before we kick it off, a couple of housekeeping items. I believe there is a box for Q&A. We'll save some time at the end if any questions pop up that are relevant. Please keep in mind, this is a tech talk, so technology-related questions would be appreciated. I would avoid sending me an IB chat, although you can try that, and definitely don't send an e-mail because that's going to take too long. And then number two, housekeeping, I think Andrew has a disclaimer, he needs to read off, and then we can get things kicked off.

Yes. Thank you very much, Brian, and thank you very much for hosting us today. I'd just like to remind everybody very briefly that today's discussion will contain forward-looking statements that may include, but are not limited to, the company's business operations, product road maps and financial performance. 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. Actual forward-looking results could 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 3, 2026. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.

And so with that said, Brian, I'll kick it back to you.

Great. Thanks, Andrew. And then again, for those on the line, I think we have about 45 minutes, so we'll try and keep it to that -- to kind of like keep everyone mindful of the time.

Maybe to start with you, Shiv, thank you for joining us. We certainly appreciate it. I'd love to get your thoughts on observations you have on the company's core competencies from a technology perspective. Certainly, before we go deep into AI and its impact on Cellebrite's business, I think it could be helpful to ground investors with regard to the way that Cellebrite has evolved from a leader for collecting a digital evidence from mobile devices into a broader platform. So would love your take on that as well as the core competencies of the company.

Absolutely. Good morning, Brian. Thanks for hosting us. Good morning to everyone who's joined. We really appreciate it and looking forward to doing more of these with all of you.

So look, I'm still relatively new to the company, but really, really excited about the amount of technology and products that we're building. So maybe from my perspective, when I still looking at this with a little bit of fresh eyes, historically, obviously, many investors have known Cellebrite as a leader in mobile device access and extraction. And that is a core competency. But when I look at all the assets we have in the company, where the company is today, I think the company today is much, much broader, broader.

So like what I think differentiates Cellebrite is that we've spent decades helping investigators collect, analyze, and act on digital evidence across the entire investigation life cycle. And so the value is no longer just simply accessing a device. The value is really in helping customers turn volumes of digital data into evidence and actionable intelligence. And as many of you know, investigations increasingly are digital. Customers really need a platform that spans everything from the initial collection, analysis, case management, collaboration. And now, which I'm really excited about, Evy will talk about this. But just this morning, we announced our Genesis product, which is generally available. So this is all about AI-powered insights. And so we'll talk a lot about this, but some of the early feedback we're getting from customers has been really, really amazing.

And so I think that's where we see our biggest opportunity. We're looking to expand wallet share by solving more of the customers' workflow, not just providing another point product. And so I think when I look at this decades of domain expertise, these very unique products around collection and then all the chaining you have to do of all of this information and insights to produce evidence that can be held to the scrutiny of the legal system, I think that's really, really unique. And then, powering with AI, I think we will bring a ton of value to our customers, and we're starting to see that with our launch this morning.

And as you've developed the platform, just kind of curious or maybe this is a broader question for Evyatar or Chris. How has your user profile changed? I mean was it initially with extraction? Was that primarily people in the field that were utilizing it and using the platform? And I'm just kind of curious, particularly within customers, as you think about the seniority level or the sophistication of the users on the platform, how is the development of the platform changed that user -- the user base?

So I can talk to that. So yes, historically, we've been selling to the digital forensic labs, which is usually this dedicated, highly sophisticated unit within a public safety organization, which is relatively small. Often, you have a few experts, the larger the organization, the more people you have, obviously. The more we expand, the more we reach and talk to and interact with other personas within the investigations -- within the agency, sorry. One thing it does is it opens a whole new TAM for us because there are a lot more investigators, analysts, prosecutors than there are digital forensic experts. So that's one thing.

The other thing that it does is it takes us higher up the chain, the command chain because it gets more visibility. We touch more units, we touch more people, and I would say, the value we deliver is broader, right? Digital forensics in itself is extremely lucrative, and we often talk about how rich the evidence that we help collect is. But as you broaden that, and of course, bring AI to the table, the impact then just multiplies. And therefore, we can really interact with much senior people across those organizations.

Got it. That's helpful. And how do you think about your customers' technology investments as well as their investigative protocols and legal frameworks that your solutions have to support?

I can start there and then please add, Chris and Evy. So again, what I was really impressed by like how we solve our customers' problems because our customers are operating in some of the most complex technology and legal environments in the world. So they need solutions that are trusted, auditable and adaptable to varying legal frameworks and data residency requirements. So what I have at least seen, we have a very, very deep -- our foundation is really in this deep technical expertise in accessing and processing digital evidence. And then over the last few years, we've invested so much in building the software sits on top of all of this. So everything from the analytics that we produce, the workflows that we have. Evy mentioned, we're now touching other personas and we have this collaborative capabilities across them.

And then we're bringing all of that with the announcement we made this morning with Genesis, where now you're using AI to kind of stitch all of this together. And really, in some cases, taking where somebody who was working on a case would take days and weeks to get to information. We're now seeing that -- helping them get to insight within hours.

So all of these things around investments that we've made in on-prem technologies, which obviously everybody is familiar with. We've invested in cloud, and increasingly, we're making investments with AI so that we can really take these mountains and heaps and heaps of data, large data volumes, and give our customers the insight that they really need to make some critical decisions and investigation.

So stepping back, I think we'll continue to operate in these hybrid environments. And another big update, which happened just when I joined is we have also worked on FedRAMP High certification. So again, that opens up another customer segment for us. And so again, we're investing where kind of our customers need our technology to be.

Great. And then, Shiv, how do we think about operating in that hybrid environment? How do you maintain -- I guess, what considerations do you need to think about, particularly in the way that it might differentiate Cellebrite to maintain the integrity of the profile, particularly around things like chain of custody. When you have an on-prem environment where it may be a little bit easier, how do you do that with the cloud? And are you capable of doing that across all the different products that you have in your environment?

Yes. We definitely have to -- we maintain all legal privacy and restriction of jurisdictions in all the geos that we operate in. And so the integrity of the evidence collection and then storage and access of that information, obviously, it's highly sensitive and very critical. So all of our systems, whether you are on-prem or if you're using a cloud product and now increasingly as we use AI, that is our differentiator, actually, which is to make sure that at any given point, our systems are adhering to the jurisdiction and the standards that we're operating in.

Got it. And then how much of the platform is hardware-related versus software? And how should we think about where the foundation lies, especially as your solutions evolve from on-prem to cloud?

Increasingly, obviously, we've been investing in the software world quite a bit on cloud. And so we expect that to continue to be a big part of our business. But there are certain segments of our customers where that is not a viable solution. So we have products that our customers use in the field where a cloud solution won't work. So it really depends on the mix of the customers that we're serving. So I think we will always have some hardware capabilities for very unique scenarios like using your products out in the field where you may not have access to the cloud and also where maybe investigations are more time sensitive where it's just not feasible to bring evidence back to a lab, and you have to do that out in the field.

But I actually see that as a really big advantage because we're kind of meeting where our customers and the users are and providing value so that they can get to the answers that they want.

Right. That makes sense. I know you guys have talked a lot about moving the use case to the edge. So that makes sense.

Maybe if we can start like moving into AI a little bit. I want to approach this from maybe two different angles. One of the questions that I've gotten from investors is just to kind of like get a grasp of the core extraction technology, particularly as it relates to mobile device OEMs having access to AI coding models? And how should we think about, one, I guess, maybe can you walk through how it currently works when you unlock a device to extract decrypt and decode data from that device? How much of it is hardware versus finding holes in the software to -- I don't know if exploit is the right word, but maybe take advantage of so that you can unlock a phone.

So it depends on the situation in a specific device. It's a combination, obviously. The software utilizes various hardware components inside our UFEDs to exploit a device. And it depends on, like it's very vendor specific. But generally, there is a significant combination of the hardware, and we are dependent on the hardware in those situations. So it's not purely software. And some of the hardware is for protections of the software to ensure that our IP stays safe.

Got it. But I guess one question is, so when -- as OEMs have access to some advanced foundation models like a Mythos to uncover where there might be vulnerabilities that could be exploited and potentially improve the quality of their software, so they don't have any -- as many vulnerable dependencies or holes in the code. How do you think about the way that the higher-quality software code that's embedded in these mobile devices could affect your ability to extract the data in the future?

Sorry, Brian, I'm having a bit of a technical issue. I lost the first part of the question. Could you just repeat that for me.

Sure. Yes. I guess, so just maybe like Chris, to follow up on the question I asked before. So as mobile device OEMs have access to advanced foundation models, potentially have the ability to improve the quality of the code, so there aren't as many vulnerable dependencies or holes in the software, basically improving the software quality of the device on -- the software quality of the software on the device. How might that affect your ability to, I guess, unlock a phone in the future or unlock a mobile device in the future to kind of extract and collect the data.

Yes. I mean it definitely makes it harder, but we're using AI on our side as well to find vulnerabilities. So...

I think we froze Chris.

I think we might have lost him. His connection doesn't seem...

I don't know if anyone else wants to pick that one up?

Asymmetric cycle that we've been...

Hey, Chris, if you could just -- we lost the first part of your answer. So if you can just sort of pick up at the outset of how you were framing the answer.

He froze again.

Okay. You can put on your CTO hat.

Yes, we can. Well, we'll get to Chris, but I can maybe share just this...

Hello. I think we got -- I think Shiv, I think we have Chris back. I see...

Okay. Take it away.

I apologize, the internet down under right now is not agreeing with me. So yes, I think we see it as kind of a faster treadmill, like the half-life of vulnerabilities is definitely shorter with AI in the mix. But...

So Chris, maybe we should take you off of video just to try to conserve some bandwidth and get your audio answer out.

Yes. Sorry about this. Yes. So as the OEMs like Apple and Google patch vulnerabilities faster using AI, finding and patching [indiscernible] of vulnerabilities that we've been in since Cellebrite began that shortens, but the attack surface really grows. They are adding new features with every new chip. They're constantly churning the code as they change and fix vulnerabilities. Essentially, they have to patch all of these vulnerabilities, and we only need one vulnerability. So it makes it a shorter half-life, but it puts us in the prime position to maintain that edge because we have this decade-plus long knowledge of these devices that we've been playing this cat and mouse game with Apple and Google.

So I see this as...

Still bandwidth issues down...

Shiv, do you want to pick up where Chris left off?

Yes. I think the TLDR is -- so a couple of things on this model stuff. Just maybe a little bit of my take too, I'm just still new to the company. In general, these powerful models are good for the entire ecosystem we live in. We obviously all want secure software. So I think the entire ecosystem is going to benefit. That's a good thing.

As it relates to our business, I think what Chris was trying to highlight is, look, we've been at this for a very long time. So obviously, vulnerabilities, he was talking about the -- we expect the span of these vulnerabilities to be much, much lower than in the past. So will this make our job harder? 100%, it is. but this is also our area of expertise.

And the second thing, what I think he was trying to highlight was, look, anybody who's experienced using AI models, you will notice as fast as this generating code to help you or build new features, it is just -- it is introducing new bugs and issues just as fast. So this is the nature of being in software, by the way, you're constantly patching things, but as you're patching and you're building new features, you're always introducing new bugs or vulnerabilities that will need to be so -- that will need to be addressed later.

So I think what he was trying to highlight is, yes, it will be harder for us, but also the surface area of the products are growing. I'm sure features and experiences will also grow. And it's just the nature of being in software. You're always going to have bugs. And so -- but we still believe we have the expertise to continue to keep up and serve our customers so that we can help them do good in the world.

Got it. Super helpful. This might be -- I don't know if Chris is back on, but this might be more of a Chris question than I had next. And that's basically where does Corellium fit into vulnerability research? And if we think about Corellium Falcon, one thing kind of back to that point of vulnerabilities, foundation models are very good at finding vulnerabilities in code as well as logic. So how do we think about Corellium's feature functionality and how that matches up against those of the foundation models?

Well, if you think about it, it's -- there are complements because...

Brian, maybe we can switch to a different question. We'll come back to Chris as his Wi-Fi...

Yes, we will come back. Okay. Yes. We'll flip to a different question. I guess maybe for Shiv or Evyatar. Cellebrite had AI capabilities within its platform for a decade or so. A lot of that was machine learning, proprietary machine learning focus. But now we're seeing something that's very different with the emergence of the foundation models. I guess how do you assess what the models do well? And how durable is your core platform in the face of these capabilities? And I think you -- obviously, you mentioned you use AI as well. So maybe you can talk about some puts and takes there.

Well, maybe, Evy, why don't you start talking about how we're using AI specifically solve the customer challenges, especially the stuff you have built. And then I'll talk a little bit about our history and kind of where I see us continue to fall.

Yes. Sure. So we believe -- and I would say we are more than convinced that AI has a significant potential in our space. It is almost like the perfect match for us. When we look at the customer problems, which is having so much data from so many different sources, lack of resources, this is like the perfect storm for AI to really be leveraged in a significant way.

And so when we started experimenting with GenAI, the frontier models and how they can help, of course, we were blown away from, I would say, the opportunity, but then actually seeing it work in real life, in customer environments has really convinced us that this is something we need to go all in with, to be honest, something that we are investing a lot and in -- sorry, and Shiv just mentioned, we announced the general availability of Genesis today, which is catered towards that use case of how can we help investigators be not just more efficient, efficiency is probably the biggest thing, right, doing in minutes what would have taken maybe weeks, but also just bring justice with now I can find things that I had no idea whether or I was not able to do it because human brain is limited, right? When it comes to that scale.

And so from the perspective of solving the customer problems, the potential is huge, but it does require a lot of investment in -- especially around the accuracy and catering it to that environment, which you've talked about before, right? Ethics, trust, compliance, all those things require a lot of attention and investment, which is what we are constantly doing and continuously improving what our products can do with those models. But we are already seeing a significant impact on those customers who are willing to adopt those solutions in a very meaningful way. And you're right, we had AI for probably a decade, if not more. This is something different. It requires a different approach, different talent, different structure, different way of doing things, which is exactly what we're doing with Genesis today.

And I guess from your -- from a user perspective, how open are your users to or your customers to utilizing the AI that's embedded in your platform? I was just thinking about is there a bunch of old sheriffs that don't have a lot of technical sophistication and getting them to use technology to begin with is really challenging? Or is there maybe a younger or more enthusiastic profile of users that's accelerating your TAM because they're very open to using technology and what AI has to offer?

Yes. So all of the above and probably a few more examples of people who are actually looking at this technology and immediately realized how significant it can be in terms of the impact on theirs lives. The one thing I will start with is, I think, even us, we were surprised at the pace of adoption -- we've been investing, let's say, in cloud technology in this somewhat traditional space for a while. And we know change requires time. I think here we're seeing something different in terms of the impact and the value is just so obvious that people are much more open to it than we have expected, which is really encouraging.

In terms of the profiles, so it is actually quite wide in terms of -- yes, you're right, you have the older, less technical detectives who see this as a really easy way to leverage technology because everything they had until today was complex. It required training. It required a lot of change management. And here, you have something that as long as you can type and ask questions, you can basically use it. There's the younger generation, you're right, who are expecting to have that kind of experience because this is what they have in every other avenue of life, if you like.

But what I'm most surprised about is that even the technical people, people who we have been engaged with for a long time, we know they're technical, we know they're very forensic and they're very traditional in how they run their operations are looking at this and realize this is something that is going to be meaningful either to them or to their end customers who are the investigators, so right, and sometimes both.

And so I'm really encouraged. I've been here, by the way, 6 years. I'm really encouraged by what I'm seeing from the forensic community. It comes with a very high, I would say, standard or expectation in terms of what we can do. That's a given, that's natural in our space. But the majority of the people today are in a position of, okay, I'm willing to adopt it as long as you do it right, which is really where we want them to be.

Yes. I'll just add, I think Evy is being modest here. Look, we've taken decades of experience in this world and brought it to life in this product. I mean when you look at the demo of this product, you can just tell how incredibly powerful it is. I mean, you can get to insights within minutes, what would typically historically take hours days, maybe even weeks. And so it's incredibly powerful. And whether you're a technical or not, the reason why this is powerful and we're able to get to insight is that the team has built this product with that idea of like you always have to earn trust. You have to make sure you have accuracy in their product. They also have an investigative lens to the experience. And so it's not just like the easy conversational experience, which you would have. It's all the underlying work that the team has done to make sure that when we produce the answers, and the insights or even the visuals or materials that can aid in an investigation is really purpose-built.

And look, you don't get this stuff from just any regular language model. There is a lot of work that the team has done. And I think that's really important to highlight because this notion of like you can use any large language model and just do this yourself. I don't think that's true because I think we have invested so much knowledge and proprietary ways of getting at these accurate answers. And so I think that is kind of invisible to the user, but honestly, I think that's powering kind of the time to value that we're seeing for our users.

And how do we think about your -- I mean, I don't know if maybe you have a good example to share of your typical user that's using your platform to extract data, maybe they're using some other products to store the data or collaborate on the data, how do they get introduced to the different -- I mean, even before Guardian went GA today, how do they get introduced to the different AI-supported products on your platform and realize the value that you have?

Yes. So with Genesis, what we did, and again, I said it requires a different approach is, one, we interacted with customers, early design partners from the very beginning to help us design this in the proper way that will actually be usable to them. But then what we also did, I think it was exactly -- almost exactly 3 months ago is we announced early access for Genesis. So we wanted to flood the market with this. We understand that in order for us -- the most important thing for us with this is to get the adoption in the market. And so we've announced early access for Genesis, and we had hundreds of requests, hundreds of people coming to us and saying, raising their hands saying, I want to use this, and we've actually had a very, very large number around 800 today of people using it in the Early Access phase.

Now that we are transitioning to GA, the first priority is to convert those people to be paying customers. But at the same time, we're maintaining a free tier, a free trial so that we can really be everywhere with this product. We have our sales team all behind this, pushing this and introducing this to customers. So we're doing kind of this going in a parallel path where we have sales led. We have almost like a PLG movement going on already today. And so we're expecting this to be exposed to a very large proportion of our customer base.

Got it. Got it. Super helpful.

Brian, I think you might have Chris in your waiting room. He's pending to be readmitted. If you could...

Yes. I...

So if the OpenExchange team can let him in, that would be great. There you go.

Yes. Great.

Thank you very much.

Chris, should we try your broadband again?

Yes. Let's do that. Do you want to swing back to the Corellium question? Do you want to ask that one again?

Well, actually, maybe just given all the audio distortion, Chris, to Mythos questions, maybe we could just take that from the top.

Sure. For which question you...

The Mythos question.

Oh, yes. Okay. Yes, let's hit that one.

Yes. So back to the Mythos question, sorry. I actually think Shiv did a good -- I heard Shiv's kind of answer on this. I actually think he did a good job on this. But -- and this kind of ties into Corellium, I wanted to get into -- it kind of covers a little bit of what you asked about Falcon as well.

One of our biggest advantages is that we have the ability to test the different vulnerabilities that AI finds on our side in Corellium. So if you think about vulnerability detection or like AI is finding vulnerabilities in source code, it's all static. We're able to take that and then validate that in Corellium as like a dynamic layer. We're also able to do the same at scale with Corellium in terms of looking for vulnerabilities in running code, which is a completely different set of requirements to just analyzing source code.

And given that we're one of the only companies maybe outside of Apple and Google, who can do this at large scale because we can -- we're not using farms of devices. We're virtualizing these devices and spinning them up on servers. It does allow us to iterate on vulnerabilities and then the code required, the exploit code required for our product to unlock these devices. So that's a very distinct advantage to Cellebrite. Our competitors don't have anything like that, like Corellium, like Falcon.

But moving back to the Mythos thing, the question surrounding vendors patching vulnerabilities at a higher rate, essentially halving the life of vulnerabilities. And I think Shiv did cover this a little bit, but it does create a lot of churn in the code. They're patching vulnerabilities much faster, which means they're modifying a lot more code across a large area inside their product, which generally introduces other bugs, other problems. And we only need one vulnerability to get in, right? They have to patch all vulnerabilities. So they're patching hundreds of vulnerabilities. And most of these vulnerabilities you see coming out of Mythos are kind of like the low-hanging fruit. The much more complex vulnerabilities that require like logic conditions, race conditions, like I mentioned before, where you need dynamic analysis to find these vulnerabilities, which Mythos is not capable of. Those are the vulnerabilities we rely on. And we've yet to see Mythos come close to finding these kind of vulnerabilities.

Got it. And then on the static side, are you able to leverage those models as well, models like Mythos or even maybe ones that are a little bit less sophisticated and less exclusive for your own vulnerability research?

Definitely. But not Mythos, we would love to, if Anthropic is listening and they want to give us access, we're happy to take a look at it.

It's expensive.

It is, it is. But yes, so we use internally. We have our own AI that we use for vulnerability analysis. And we've been quite successful with that. We've seen this kind of patch again. There's a couple of terms out there for this race to patch all these vulnerabilities that found before. We saw this like maybe 5 to 10 years ago with the fuzzes from Google and Apple, they were fuzzing heavily, and there was tons of bugs being found. And it didn't really change anything for us. We've been playing this game with Apple and Google for a very long time. So we're used to their patch cycles, and we know what to look for to find vulnerabilities in their patches. So yes, their patches for vulnerabilities contain vulnerabilities sometimes. So we haven't seen any kind of slowdown in the number of vulnerabilities in their products.

That's helpful context. And then I want to -- I think we've only got a few minutes left, so I want to make sure we get into a little bit more product focus. But obviously, you've got a new AI-powered products like Guardian Investigate and Genesis. Could you just maybe frame out for us, obviously, Genesis going GA today. But how does Guardian Investigate differ from Genesis, maybe just kind of like level set for those that maybe aren't too familiar with the platform and then we can go into a little bit more detail.

Yes. So I'll take that. Yes, so with Guardian Investigate, so Guardian is our SaaS platform. We launched it a few years ago, Guardian Investigate is essentially an extension of that to cater for the broader investigative use case that we've discussed before. Now Guardian Investigate is a [indiscernible] product is part of our platform. This is the system of record, if you like, for investigations, where you manage your evidence, you manage your cases, your tasks. You also run analytics on top of it and then you're getting a lot of the AI capabilities that are similar to what you have in Genesis within the context of that platform where agencies actually go and transform the way they run their entire investigative life cycle.

With Genesis, what you have is a product that is not sitting on the platform, but actually something you can adopt really quickly, and that was intentional from us where we're saying our customers, we know they're on this maturity curve when it comes to transforming their entire operations. But they all have that same pain, same problems that -- with analyzing the evidence. And so we are providing them with a quick entry to that new age of investigations as we define it, that will then help them mature and evolve. And we believe that at some point, yes, we'll adopt the entire platform solution. But if they're not there yet for whatever reason, then they have a quick entry point to something that is really powerful. But in terms of the underlying capabilities and I'll say, the use case, they're pretty similar in that respect.

Any good examples of how much more effective one or the other platform is versus the way that investigators may previously approach their workflow?

So just to make sure I understand the question. So compared to what they're doing today is what you're asking?

Yes. So if you have investigator Genesis, a customer that's adopted one of those platforms, is it for everything they do and then how much more efficient can they be on that platform versus maybe what they've done before?

Yes. So one thing to highlight about both actually is that this goes beyond mobile forensics, right? So with Genesis and Guardian Investigate, you're actually able to create cases that include more than our mobile extractions, but mobile, computer, CDRs and many other file types, including media of all types. To create one case that includes all those data sources in one place. And so the ability to do that is really where you're seeing the multiples come into play, right? Because you're not only saving the time of analyzing a mobile device, which can take a long time, but now you're looking at multiple mobile devices, but also corroborating that with police report, with call detail records, with body-worn cameras, with additional data sources that are part of an investigation.

And so what we're seeing is we have some really extreme examples of people telling us. I've been investigating this case. I had 3 investigators doing manual work for 2 or 3 months. And within 5 minutes, I was able to find what I needed to actually go and prosecute that case, which is incredible. A couple of other examples, we had one case that involved sexual abuse of minors, where we had 3 devices. Now to put that into context, analyzing one device thoroughly can take days. Now having 3 of them as part of the case, the investigators came in, they knew one victim in that case. And within 15 minutes, they identified 15 more victims they had no idea about.

Now they said transparently, manually reviewing those devices would probably result in a similar result in terms of identifying more victims, maybe not all 15 additional ones, but most of them. But the time there was a really big factor because within 15 minutes, they were able to do something that they estimate would have taken 2 weeks. And we're talking about 15 more victims here that would have been suffering during that time. And so that got escalated to a federal case and prosecuted. So these are the type of impacts. So we're looking at weeks to minutes.

Got it. Andrew, I think we're over time. So I want to be respectful of everyone's time. So I don't know if you want to end it there or if you want to keep going or whatever.

I think, Brian, we want to thank you for hosting this today. We hope this was helpful for everyone, and we'll look forward to just continuing to stay in touch because I think we're very excited about the products and the technology we're building, and we'll look forward to just finding other windows to share more about the amount of innovation that we're bringing to market.

All right. Sounds good. So Chris, Shiv, Evyatar, you too, Dave, and Andrew, thank you so much for joining us. And thank you, everyone else on the line as well.

Thank you, guys. Thanks a lot.

Thank you, Brian.

All right. Take care, everyone. Take care. Bye.

Good afternoon, everyone. Thank you for joining us. So my name is Brian Essex. I'm JPMorgan's cybersecurity and DevOps analyst. And with me today, I'm very pleased to have Thomas Hogan, Cellebrite's CEO; and David Barter, their CFO. So both of you, thank you so much for joining us.

Maybe a great place to start -- and by the way, for those in the audience, I'll leave 10 minutes or so at the end of the event, just to take any questions that you might have. But maybe a great place to start would be with this quarter's results for those that may not be too familiar with what you do and the trajectory of the company and the pathway that you're on. Maybe we could start with what you do, just a very high level and then Dave, if you want to hit results because I think it's worth noting the growth rate, profitability and so forth where you are because I think a lot of people are focused on that right now.

I'll do a quick flash on who we are for those that aren't familiar, and then I'll let Dave give you the cliff notes of -- or the snapshot of the P&L and progress of the company. I guess in the simplest terms, we truly make the world that we live in safer. So our software, our platform and to some extent, we're an appliance, is used by virtually every law enforcement agency in the free world, any democratized nation, both at the local law enforcement and the intelligence and federal level to help prevent bad things from happening. And then when bad things do happen, we help catch really bad people and put them away. And so that's what we do.

We've been in business for just about 20 years. And we're recognized and I think acknowledged as the market leader. Clearly, it's a small universe of people, but we're the market leader. So like if you're a citizen or you have children, like, you're glad we exist, even though you may not know us, you're happy that we exist. So that's what we do. So Dave?

Thank you, Tom. And Brian, thanks so much for having us. Just a couple of highlights. In terms of -- as you think about Q1 and really as you think about this fiscal year, it's really for us, it's an acceleration of ARR. We came off last year. And when you think about the heritage of our business really around unlocking extractions. We've really been building up a growth portfolio. And so we're real pleased with ARR growth of 21%, free cash flow margin on a 12-month basis of 32%. And for us, this quarter was really about just getting started at an ability to launch a couple of products towards the end of the quarter, started early access on an AI product. And really, this is one of those stories that the best is yet to come because we'll have almost a dozen releases over the course of this year.

So I think we're really just pleased with how the year started in terms of really building that base of how we're extending the platform.

Got it. And then maybe, Tom, just one layer deeper. So you build a platform that extracts data from mobile devices, right? And then an analytics platform to help analyze and digest that data, store that data, share that data. How much of your revenue is hardware versus software? And can you talk a little bit about customers that use your platform and exactly the value proposition that you have for those customers?

Yes. I'll -- Dave, you go first with the mix of hardware and software, and then I'll click in.

Just because you said you're an appliance. So I just want to make sure we address that.

Well, and such a strategic part of the business. So about 8% of the revenue is nonrecurring. I mean, it's a little mix of hardware as well as some professional services that go into making customers successful. 92% is a mix of term-based subscriptions, but we also have cloud subscriptions and even consumption contracts. And so it's a very contemporary business in terms of our mix of our software revenue and all running at about an 86% gross margin.

Yes. And then last year, it was kind of interesting. You had a number of different headwinds that you managed through. Can you maybe talk about what some of those headwinds were and then the outlook that you have for growth this year now that, that kind of environment is behind you and then you have a number of different, I think, attractive levers to really throttle your growth a little bit.

Yes. I mean, our historic growth rate over the past several years has been in the low to mid-20s on an ARR basis, while delivering, I think, healthy levels of EBITDA and free cash flow. In 2025, we dropped below 20, and that headwind was almost exclusively from -- we do just under 20% of our business in the U.S. federal market. So I think in the 17%, 18% of our business is U.S. Fed. And when the administration turned over 18 months ago, a combination of chaos, change in leadership, the whole early days of the DOGE initiative, but then the passing of the BBB, but the time it took for that to work its way through the system, mean all those things conspired to take our U.S. federal business, which has historically grown in the kind of the 24% range to essentially flat in '25. So when 20% of your business is modeled at 24% growth, and that goes to flat, it's tough to keep the total in the '20s.

So we dipped into the, I think, the 18-ish percent range as a company last year. And as you know, investors don't like decel on the top line even though we maintained healthy margins on the bottom line. So now segue to this year, and we signaled throughout the year that this was a temporal sort of situation and sort of a set of circumstances that I just described. We expected that we would have a strong rebound in '26, which we have building confidence is going to happen. And we actually signaled in our last earnings call that we think there's at least an opportunity for the growth rate in that business to not just get back to where it was, but we think we have opportunity to exceed those historic growth rates, partly catch up, but largely due to the expansion of the portfolio and assets that are relevant to the U.S. federal market, and then unfortunately, for all of us, the geopolitical instability around the world is also exacerbating the appetite for the things that help mitigate cyber and digital risk.

Great. And maybe if you can talk about the -- where you go from this quarter. So you reported 21% ARR growth, healthy profitability. To your point, pretty well positioned to go greater than your historical growth rate. Can you maybe talk about some of the levers that you have? I mean, you just launched Genesis, which we can talk about, advanced unlock product Guardian Investigate with the federal recovery. We've got international momentum, like a lot of different things are kind of like working in your favor. You mentioned the Big Beautiful Bill Act, which I think you've identified, you have half a dozen or so different initiatives in that Act that could bode well for spending in your exposed categories of all of those things, I mean, which are you the most excited about? And relative to your guidance in the high teens for revenue, like what has to go right to get you in kind of like low 20s or better category?

Yes. I'm going to answer it in a couple of different ways. If you look at just size of TAM and growth rates, we announced a product called Genesis, which we think is the market-leading agentic AI. I know everything is whitewashed AI. This is actually a real product. It's being used today by 500 people in the law enforcement and intelligence community as early adopters. The feedback will make your head spin in terms of the impact it's having on the efficacy and speed, efficiency, productivity, of processing all this data and information. And the other thing that we're hearing is we've tinkered with virtually every LLM in the market, thinking there's got to be some gold in those LLMs, and we get garbage data back, and we deployed the Genesis product from Cellebrite and the quality and the insights it's generating are things that we didn't even think was imaginable.

We're solving cases in minutes and hours that would have taken months to go solve. And so we've pegged that TAM at $12.5 billion, which is about 3 to 4x the size of the TAM we've been chasing for the last 20 years. So it's a big market. We expect it to grow significantly, but it will ramp. It's not going to be an overnight thing. The other -- the product that, Brian, that I get excited about relative to, let's call it, in the next 12 months and upside to the current model that we all have is actually in the defense and intelligence space. And that leverages things like our kiosk capabilities, Corellium, Genesis and the drone forensics asset is of huge interest to intelligence and defense people in democratized, allied nations around the world and their ASPs are orders of magnitude bigger than what we've seen before. So if we execute and convert in that space, the revenue potential there in the next 12 months is actually probably the thing that gets me most excited because I'm seeing these things and we can touch them.

The Genesis thing is going to happen, but it's going to build. So I don't know, Dave, if you have a different point of view, but ...

I completely agree. And I think maybe to complement just being able to have our case evidence being through FedRAMP, which was an 18-month investment and when I think about the government vis-a-vis maybe some other verticals that have been slow to digitally transform, you're just at that point where you can really help the government do really what they're looking for, and this is within the agencies but also even within the congressional ranks where people are looking at the opportunity of connecting the data within the government all in the name of public safety and really accelerating justice. And so I think looking at that as a lever where, gosh, we just got ATO and already customers are lining up and so that's kind of an interesting dimension in terms of just thinking through a vertical that's a laggard and cloud adoption, something that plays to our strength.

If you're not a government geek, FedRAMP basically is the certification to run your asset in the government cloud and there are different levels of certification, Level 4 is the highest. Level 4 is reserved for data and applications and services that if there's a breach or leak, there could be catastrophic harm to the United States. To achieve that level, you have to clear over 400 security controls. It is a non-trivial multi -- 2-year, millions of dollars, lots of people, and there are about 95 companies on the planet. Think about all the mega techs, Oracle, Google, those are the people on that list.

We're the only company that's in this space that's achieved certification and authorization to operate at that Level 4, which means if you're a government and you want any cloud-based asset to make our world safer, we're the only answer.

Yes. And I want to ask you a little bit about the federal business. So I mean, Israeli company, you'd already grown a federal business a pretty meaningful size, but a while -- not too long ago, you bought a business which became Cellebrite Federal, can you talk a little bit about the composition of that business, the management structure of that business and how that changes the access that you have to federal contracts now?

Yes. So we form -- because we're viewed as foreign owned, and by the way, ironically, we're labeled an Israeli company because that's our roots and half of our employee base and our R&D is based in Tel Aviv. But we're actually -- when you say foreign owned, we're 41% owned by the Japanese, not by Israelis. So -- but you're -- the question?

Well, the question was the creation of Cellebrite Federal with the unit you acquired.

The proxy -- so to operate -- so we sell -- we have been selling to federal for a long time. and the foreign ownership didn't preclude that, but none of our people could get cleared. And therefore, if it was a super classified sensitive project, and they needed on-site expertise from Cellebrite to come help with the design or the deployment or the usage, we were unable. All we could do was sell our stuff, throw it over a firewall to the FBI or to Langley to somebody and wish them luck. And so the federal government asked and wanted us to set up this proxy company called Cellebrite Federal, very clever marketing name. But basically, it's a firewalled company with an independent Board of Directors.

So we have 3 independent Board members that are not affiliated with the parent, there's a firewall of information. So anything that's classified, I don't even get to see. It fully rolls up as a consolidated operation. We do shared services for G&A things, but the IP and then the work on specific government classified projects and getting classified people now sits in that proxy company.

So what does that do for the health of that business in terms of the pipeline that you have particularly if you consider the headwinds that you had in federal last year and then the new products that you can sell into the federal this year?

That plus the FedRAMP ATO were the 2 big investments that took us a lot of time and some money to go set up to open the aperture of opportunity. Now it turns out that we bought a company, we announced the intent to acquire a company called Corellium in June last year. We closed that transaction in December. And as part of the mitigation -- risk mitigation strategy of buying a very sensitive classified technology, the CFIUS, which inspects U.S.-owned assets being acquired by a foreign company. It turns out that the proxy company is going to end up being a benefit or a tailwind for us because it is likely CFIUS will request or mandate depending on how you describe it, that the IP and Corellium be housed and contained within that proxy company gives them comfort that, that IP is being protected from bad operators or other countries around the world.

Right. And now that you mentioned Corellium, we'll kind of bring that one up too. Particularly given the demand that you see in that business from a defense and intelligence, how do you extend that technology meaningfully into enterprise or law enforcement accounts?

Yes. The most immediate opportunity, so if you think about our cohorts, we have -- we sell to the Global 5000, and that's roughly 7%, I think, of our total P&L. We sell the classic state and local law enforcement in the U.S. and around the world. So next week, I'm going to be with the commissioner, The Gardaí, which is the national police force in Ireland, the Metropolitan Police in the U.K., the national police in Australia, they're all customers of ours as well as every major city, every major city in the United States uses our technology and our products. So the ...

I mean just how do you bridge the Corellium technology from D&I to commercial?

So that said, the Corellium asset plays most predominantly in defense and intelligence. But what we're seeing is a big use case opportunity in the private sector, which has been kind of a slower grower for the last couple of years, but Corellium's ability to assist with dynamic security, DevSecOps and mobile pentesting and some other use cases and specifically in the automotive space or any space that has an intensity of ARM-based technology is turning into a very powerful use case. So it's like a barbell where Corellium has huge upside in usage in defense and intelligence, and we think equally big opportunity in the enterprise. There is opportunity at the state and local level, but it's much -- there's much bigger TAM, we think, in D&I and the private enterprise.

Got it. And then in the international space, how should we think about the international pipeline and the demand that you're seeing there across multiple regions. Is it concentrated? Is it broad-based? And is that really -- how levered is that to geopolitical conflict that we might hear about every day?

I'll let Dave add some commentary, but we had a very robust quarter in Europe. Asia Pac was in the low 20s. I think Europe was in the mid-20s in terms of growth. Europe gets credit for -- so we made a conscious decision to move a year ago from the traditional post bang crime happens to get into prevention and intelligence, which really plays to the military like -- if you're in the military, whether you're the national army of, you name the country, you're not worried about a murder case. You're trying to protect your country and so I don't know if you want to add?

I think just in general, I'd say the team in Europe has done a great job extending the platform. So I think the -- I give them a lot of credit, where they've done a great job of going from the unlock extraction really through Guardian and starting to bring out the platform. They do a great job with things like Pathfinder, which is really oriented around multiple device situations where you might have 100 to 300 phones. And so they've done a great job on the advanced analytics. Similarly, in APJ, which has also stepped up growth 4 or 5 points sequentially, they're starting to build out case admins of the Guardian platform in places like Australia, but they're also seeing incredible adoption with Genesis early on.

And those are kind of all new things in the sense that historically, we've needed to move our products into a sovereign cloud and we're starting to see in those 2 regions, in particular, adopting Genesis on an early access basis even though it isn't in a sovereign environment. And so I think we have great commercial leadership in those regions, extending the platform to its full potential.

Europe really moved first on the focus in D&I and we saw their year-to-year growth bump up like 10 points from 15 to 25 and that was -- that's being driven by D&I growth in the mid-30s. And we think that we expect and hope that, that's a harbinger of what's about to happen in the U.S. now that we have ATO done, and we've been focused on D&I.

Got it. That's super helpful. I wanted to ask about a relatively new management team mean you've been on the board, but previous CEO, CFO, were based in Israel. You guys are based in the U.S.. How does both the style of management as well, as your ability to be domiciled where most of your revenue originates, change the way that you're able to manage the company?

We should pull Ronnen up here. He's one of our long-term veteran Israeli employees. Look, what I'd like to tell people is we're not an Israeli company. We're not a Japanese company. We're not a U.S. company. What I tell the market and our employees and our investors, this is a global company that's a force for good. And in this day and age of digital, just take the notion of work from home and extend it where the leadership team sits to us is less relevant. And I think we communicate and operate as a team. And I just want -- I have to give a shout out to 50% of our employees are in Israel, and we haven't skipped a beat in the last 2 years in spite of all the conflict and turmoil and things that our Israeli employee base has had to deal with, which is a remarkable testament to their commitment to the company. But I think it's working.

Most of the senior leaders now are U.S.-based, but still 50% of the employees are in Israel and we're in it together, and we have a common bond, which is our mission, which is to make the world safer, and we unite behind that, and we communicate.

Very helpful. I do have one more question, and then I'll open it up because we do have a couple of minutes left, but I just want to ask more detail on the Big Beautiful Bill Act. How much -- like what are the programs that you've identified that you have exposure to? And as we kind of track what materializes out of that effort? How should we think about the way these programs will be identified, funded, distributed as we're just basically trying to track your exposure to those spending initiatives.

It's pretty -- it's spread across the board, which is what's exciting and I think speaks to the power of the portfolio. But to give you some examples, there's a lot of money that's earmarked at digital evidence management and collaboration.

I mean Dave touched on, just to give you an example, I'm working with one of the leading congresswomen from Florida, who's trying to sponsor a bill to create -- here's a big idea. Okay, child exploitation is a big problem. And one of the ways to fight it is to share information. But sharing information, CSAM information is hugely sensitive and can be toxic. And so she reached out and said, "I want to sponsor a bill, and I've heard Guardian, which is our repository for digital artifacts has now got ATO certification, which means it's the most secure cloud-based data you can find, can you act as a repository so that we can share critical information across agencies and geographies across the United States to protect children from child exploitation." So that's an example.

A lot of focus right now on fentanyl and opioid. In the defense sector, I don't have to remind people about drones, you see it everyday on the news. What can you do with field-based triage for drone forensics and digital devices. So those are some of the categories in the BBB that -- and by the way, some of the specs that are coming out, specifically -- or explicitly say this must be cloud certified because of the efficiency for delivery and security, and we're the only player in the space that has that certification. So it's across the board, counterterrorism, child exploitation, s** trafficking, fentanyl, all the things that you would expect, actually, we're in the middle of it.

Great. Great. With that, I wanted to reach out -- or anyone in the audience have a question? All right. Ken, we'll get a mic over to you.

I would just ask, can you give us a feeling for how you grow. We understand you have these digital forensic tools that are the best that they all need. But what drives your growth? Is there more need to use it -- drive it? Do they pay per usage or do they buy for capacity? What drives your growth?

Yes. And the answer is yes, but I'll do a click down and give you a little bit of color. Our Guardian product, which -- so you think you extract data from a device. Now what do you do with it? Well, in the old days, they would put it on a thumb drive in the police department or wherever they were and then if they wanted to share, say if Boston PD wanted to share it with the DEA agent on the Texas border. Guess what they did. They took the thumb drive, and they got in a SWAT car and drove because they had to maintain chain of custody, right? So Guardian is our cloud-based purpose-built repository to store that and that is based on -- it's not usage in the sense of users, it's usage gated by terabytes of information that's stored in that platform.

Genesis, which is our new AI application, agentic AI. That's not -- also not based on users, that's based essentially on prompts and queries and it's a tokenization model. So the more they use the AI engine to help solve crime, it's a variable cost or variable revenue source for us that effectively becomes value-based. But on top of those, you have portfolio expansion. We've been very aggressive in the last 18 months in a combination of inorganic and organic build-out. So we have new things on the truck to sell. Unit growth is going up because unfortunately, digital crime is going up, not down. And so -- and then pricing, we have pricing power, and we don't abuse it, but it's probably 4% to 6% pricing power. There's unit growth. There's portfolio expansion in terms of new product and then there's usage of either terabytes for storage or tokens for AI.

Yes. I think we're about out of time now, so I apologize for that. But with that, Tom and David, thank you very much for joining us. We really appreciate it. I do think, by the way, I think there's also going to be a webcast. So there should be a transcript of this up there, too.

Thanks for having us. Great. Thank you. Appreciate it.

Thank you.

Thank you. Take care.

Welcome to the Cellebrite First Quarter 2026 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer. Mr. Kramer, the floor is yours.

Thank you very much. Welcome, everybody, to Cellebrite's First Quarter 2026 Financial Results Conference Call. I'm joined this morning by Tom Hogan, Cellebrite's CEO; David Barter, Cellebrite's CFO. Also with us today are Marcus Jewell, our CRO; and Shiv Ramji, our new President of Products and Technology.

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 and transcript. Please note that today's press release and financial statements, including GAAP to non-GAAP reconciliations are available on the Investor Relations website at investors.cellebrite.com.

In addition to the press release, we posted a separate investor presentation that provides an overview of the business and our recent financial performance. I'd also like to remind everybody listening that the slide in your webcast viewer is a placeholder only. There are no actual slides to accompany the prepared remarks. We also published supplemental historical financial information for each quarter of 2025, along with full year 2024 and 2023 on our Investor Relations website.

Additionally, unless stated otherwise, our discussion of first quarter 2026 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 comparable periods of 2025.

I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's business operations and financial performance. 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.

Actual results could also 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 3, 2026. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.

And with that being said, I'd like to turn the call over to Tom.

Thanks, Andy. I'm going to start with a quick summary of the quarter. Cellebrite delivered solid first quarter results that either met or exceeded the high end of our ARR and EBITDA guidance. ARR grew 21% year-over-year to $493 million. We delivered adjusted EBITDA of $30.6 million, up 29% year-over-year.

Our free cash flow margin for the trailing 12 months was 32%, and our Rule of X continues to track north of 50%. Dave Barter will add details to the quarter, along with our guidance for the second quarter and a confirmation of our full year guide. I want to use the majority of my time this morning to review a range of important milestones related to our portfolio, our value prop and their corresponding expansion of our TAM and the potential for added top line growth.

We've talked for the past year about multiple areas of important innovation, and I'm pleased to update our investors today with the delivery of a range of new products and services. I want to intentionally start with AI and its impact on our hardware-enabled software platform. The market narrative is clear. AI will create winners and losers. The trick for investors is to discern who wins and who loses while virtually every vendor declares pending success or AI immunity.

Our position has been clear, but until now, it's been a promise versus a product or measurable results. We're now converting that promise to product and within weeks and within the second quarter, we will begin to convert those products to bookings and revenues. AI is differentiated at Cellebrite by our trusted access to digital evidence, most notably our insights to the complexities of mobile data to our court-ready workflows to our decades of deep domain expertise and to the governance and security of our platforms.

These industry unique capabilities and our reputational trust when linked with the heritage of innovation and technological prowess have positioned us to lead the pending explosion in AI-enabled investigative analytics. There is no margin for error here. This is stuff that you have to get right. The future is now.

This new chapter officially began on March 16 when we publicly announced Genesis, our Agentic next-gen AI solution. Genesis delivers rapid, actionable insights from voluminous, complex and often disparate data sources. To underscore product fit, need and value, we announced Genesis 90 days prior to our planned general availability. We made the product available to a select group of early adopters to gather pre-release market feedback.

Candidly, we expected 1 to 2 dozen takers. 8 weeks later, -- we have over 500 registered users. These users represent over 15 countries and come from agencies of all shapes and sizes. And I'd remind our listeners, this came with 0 marketing, pricing or packaging. The second and most exciting development is the early feedback from these users.

And rather than me translate their feedback for all of you, I took the liberty -- I'm going to take the liberty to read verbatim, a sampling of unsolicited e-mails we received from early customers. While we need to protect their confidentiality, we have otherwise not edited any of the commentary you're about to hear.

The first is from the leader of a specialized counterterrorism unit at a regional police force. He wrote, "It would be unethical of me in my job to keep my community safe to not report on this capability, ASAP. The Cellebrite Genesis program is not an incremental improvement in digital evidence analytics. It's a quantum leap and produces a level of detail, accuracy and volume of actionable information at a speed that is exponentially better than any existing capability."

Second example, another customer that comes from our Asia Pacific region told us, "I've experienced a very wide range of digital forensic and analytical programs over nearly 20 years of effectively combining criminal investigations with digital forensics and analytics. Genesis is the finest digital evidence product I have ever used. Its ability to process data from mobile phones, computers, documents, CCTV and spreadsheets and produce very high-quality contextual findings with references to precise artifacts would be of potential life-saving value in instances of live or emerging threats."

The last example I'll share, a detective who works at a U.S. County Sheriff's office in the Southeast observed the following: "The past 2 weeks have demonstrated the most significant ROI for the Genesis AI platform to date. Despite a 1-week gap for the Cellebrite user conference, the unit successfully deployed Genesis in a high-priority exploitation case involving an online persona targeting children. Within 15 minutes of ingestion, Genesis identified 16 additional victims previously unknown to investigators. It is estimated that a manual review of these devices would have required approximately 2 weeks of investigator man hours. The case has been successfully forwarded for federal prosecution. This major win proves that Genesis AI is not a luxury tool. It is a critical resource for victim identification in time-sensitive exploitation cases."

And the list goes on, but I'll stop there. The impact is real and the outputs are highly differentiated from past experience with horizontal LLMs. We're excited about the potential to convert these early trial adopters to customers post GA in mid-June. In mid-June, meaning 30 days from now. I would remind our listeners that our 2026 plan assumes 0 AI product-specific revenue, which will now obviously not be the case. We were optimistic we'd make progress, but we candidly underestimated the speed.

I suspect as analysts, you're anxious to understand the ramp and the addressable market. So let me give you a high-level view, but I want to caveat my comments by acknowledging that AI could not be more dynamic and in many ways, unpredictable. That said, we estimate the TAM for investigative AI over the next 4 years at roughly $12.5 billion. We think it is entirely possible that the AI revenue over that time frame could approximate the current total revenue of the company or said differently, we see an opportunity to double our business with strong execution and continued innovation. The takeaway is this is big, and as we've shared previously, a clear Cellebrite opportunity versus a threat to our business.

The last question I might anticipate is where and how do we sustain differentiation. At a high level, Genesis is differentiated by the upfront investment we make before the model runs. We've embedded nearly 2 decades of domain expertise in our preprocessing, prompt engineering and inference training. The result is effectively a vertical language AI model that is purpose-built around investigations, evidence and justice in ways that a frontier model pointed at raw data simply can't match.

I have one final data point that underscores the game-changing nature of this technology. Those of us that have been in enterprise software for years are accustomed to 6- to 12-month deployment time lines and months of end-user training. A Genesis tenant can now be deployed in a day and training is nonexistent. Nontechnical law enforcement and intelligence officers become instantaneous productive users. It almost sounds too good to be true, but it is, and it's incredibly exciting to say the least.

A few closing thoughts on this topic. First, Genesis is not our only monetized AI offering. Genesis is perfect for customers that want the benefits of AI today, but are not yet fully ready to manage cases, store evidential artifacts and analyze them using our Guardian platform. For those that are ready, Guardian Investigate incorporates similar AI capabilities within its workflows. We are also making rapid progress with an on-prem AI offering, where disconnected or air-gapped insights are mission-critical.

All of this, of course, is focused on our outbound AI offerings. We are making similar strides with the internal use and leveraging of AI, which will deliver steady improvements in our operating efficiencies and the potential to further optimize resource allocation for growth-focused initiatives. In summary, AI will turbocharge this company across 3 vectors: our TAM and top line growth, the efficiency of our total spend and most importantly, the pace at which we make the world a better, safer place.

Speaking of Guardian Investigate, we achieved another milestone at the end of the first quarter when GI, our AI-powered system of record for case management, moved into general availability. While multiple evidence platforms focus on video evidence, Guardian Investigate is an AI-powered modern alternative to a digital evidence management system.

Guardian Investigate is a virtual case management solution that is focused on all things digital, including video, audio, call records, ballistics, drones, CCTV, et cetera, but is also optimized for digital data for mobile phones, which remains the preeminent device involved in modern investigations. GI supports the day-to-day needs of investigators by enabling investigative teams to build stronger case narratives, collaborate seamlessly, securely store a diverse set of data sources and file types that extend well beyond traditional smartphones and interrogate this data with the industry's most powerful Agentic AI capability.

Like Genesis, Guardian Investigate's Agentic AI is already making a measurable impact on the speed, efficiency and efficacy of investigations. Response from early adopters has also been strong, and we expect steady growth and penetration as we enter the second half of 2026.

Let switch gears to the unlock and access world. While our portfolio has expanded significantly to include prevention, secure collaboration and provide advanced analytics, we recognize that in many cases, the process starts with the ability to access and unlock devices. To ensure leadership in this phase, we doubled down in the second half of 2025 on our Android and iOS unlock capabilities and emerged in late Q1 with what we believe is the most advanced and comprehensive platform for unlocking and accessing the most diverse set of mobile devices in the industry. For customers seeking a unified and singular platform without compromise of capability, Cellebrite now offers a best-in-class solution.

I would also remind investors that unlocking a device is just one part of a much longer journey. It's often the beginning and it's rarely the end. The post- unlock process of extraction, decryption and the decoding of binaries to readable information is an equally daunting task that requires significant investments in ongoing research and a source of significant differentiation for Cellebrite. Our leadership here is made possible by the combination of our material investments in research, combined with our advanced AI capabilities and the powerful assets acquired through Corellium.

Next up, FedRAMP. After 2-plus years and a significant investment of time, money and talent, Cellebrite announced on May 6, our FedRAMP high authorization to operate. As you may know, this level of certification is reserved for applications, data and services that demand the most stringent levels of security and governance.

There are less than 100 companies with high Level 4 certification, which is reserved for cloud-hosted data and services that carry the potential for catastrophic risk if compromised. Cellebrite was sponsored by the U.S. Department of Justice and our ATO now opens these agencies to the evaluation and pursuit of Cellebrite's growing portfolio of government cloud offerings, including our flagship Guardian platform, which enables a powerful combination of efficiency, speed and the collaboration of mission-critical information across the U.S. departments and agencies.

This opportunity, which we expect will ramp gradually over the next several quarters and into 2027, uniquely positions us as all U.S. federal agencies plan and prioritize their technology platforms for fiscal '27. Another topic of significant interest has been our progress in U.S. Fed. As was well chronicled, this segment was essentially flat in 2025, driven primarily by a combination of budget pressures and organizational change. While renewals remain strong, our new bookings experienced a significant slowdown last year.

The good news is this business is rebounding quickly as predicted. Our rebound is being driven by a wide range of positive developments. First, the stabilization of agency leadership, combined with the anticipated release of material funding targeted at cyber and digital initiatives. This includes appropriations that are directly targeted at Cellebrite sweet spots like digital evidence management and collaboration, advanced analytics and solutions targeted at the fentanyl and opioid crisis.

And second, the unfortunate realities of elevated global geopolitical instabilities. These external forces have been further enhanced by multiple internal developments within Cellebrite. The close of Corellium in December, which is still pending CFIUS approval, the acquisition of SCG, the market-leading drone forensic solution, the announcement of our integrated field-based kiosk for forensic intelligence and extraction at the point of engagement, our FedRAMP authorization to operate and the combination of a new business unit leader, along with an elevated focus on defense and intelligence from a go-to-market and product marketing perspective.

The combination of all these internal and external factors are starting to surface in our results. The U.S. Fed space is beginning to accelerate with a growth rate clearly headed back to the 20s with the potential based on large strategic initiatives to exceed its historical mid-20s growth rates. We are also encouraged by our U.S. Fed pipeline, which has increased 35% year-over-year.

These dynamics are not limited to the U.S. EMEA, as another example, has increased its ARR growth 10 points year-over-year to 25%. A core driver in EMEA's expanded growth has been the defense and intelligence sector, which delivered growth in the mid-30% range, which is a direct reflection of the strategic focus they launched 1 year ago, and we think a harbinger of what's about to come in the United States.

I want to underscore that the list of the 7 major innovation milestones we just touched on has been in flight for the past 12-plus months, but have literally hit the market over the past 4 months, many of which have been delivered over the past 8 weeks. We now need to do our work to execute and deliver, but our materially expanded portfolio gives us the assets we need to deliver our committed acceleration of growth. I want to switch now from the material expansion of the portfolio and strategy to exciting progress in elevating the Cellebrite brand and market awareness.

In April, we hosted our second annual C2C conference in Washington. This 3-day conference attracted roughly 850 total attendees, an increase of over 20% from 2025. The list of attendees included representatives from over 30 countries and nearly 500 organizations across law enforcement, defense, intelligence and the private sector. The feedback was exceptional and attendees are already looking forward to next year's session in Dallas, Texas.

The second highlight of the conference was the evening Gala celebrating our second annual JUSTYS. This ceremony is an annual recognition of exceptional contributions and excellence by the brave men and women, who work every day and risk their lives to make our world a better, safer place. This year's ceremony was broadcast live by the Law and Crime Network, which has over 7.5 million subscribers.

Funds raised in the honor of the 20 award recipients were allocated to C.O.P.S. U.S. and C.O.P.S. U.K. both of which are organizations dedicated to assisting the children and spouses of fallen officers through a combination of counseling and scholarships. It was a proud evening for team Cellebrite.

Let's switch gears to a quick organizational update. As many of you saw in our April 30 announcement, we announced that Ronnen Armon, our Chief Product and Technology Officer, will retire on July 1. We want to thank Ronnen for his leadership and contributions to our company's growth and success over the past nearly 6 years. He will be missed both personally and professionally.

We are fortunate to also announce the appointment of Shiv Ramji effective immediately as the new President of Products and Technology. Shiv brings a rich and successful career of growth and product leadership at global relevant brands such as Auth0, Okta, Amazon and DigitalOcean. Shiv's experience and expertise adds important depth in 3 categories: security, AI and the cloud, all critical to our future and our differentiated value proposition. Shiv will continue to be based in New York City and will work closely with Ronnen over the coming 6 weeks to ensure a smooth transition. As Andy mentioned, Shiv is here with us today and he will be available for Q&A.

Before I turn the call over to Dave, I want to acknowledge the hard work and contributions of our team, but most especially our colleagues in Israel, who have once again demonstrated true resilience and commitment under extraordinary circumstances during the conflict with Iran. The conflict with Hamas on October 7 was difficult at best. The more recent conflict with Iran has tested their resolve at a new level given the heightened military action and proximity of Iran.

Their strength and dedication epitomize the character of our company. Their commitment to our mission remains remarkable and a direct reflection of everything we do at Cellebrite. I'd like to close by sharing that at no time since I joined Cellebrite in the summer of 2023 have I been more optimistic about our future.

The level and pace of innovation and the expansion of our portfolio is unparalleled and gives us the opportunity to further assert our leadership in terms of both mission, growth and value creation. It's an exciting time to be part of Cellebrite and an ongoing privilege to lead a company that is so critical to the safety of this world.

With that, I'll turn the call over to Dave.

Thank you, Tom. Q1 represented a quality start to the year in terms of the financial metrics. ARR increased 21% to $493 million. And from a sequential perspective, it grew by $12 million. Our free cash flow margin continues to track well above 30% on a trailing 12-month basis.

We continue to hold to our Rule of 50-plus commitment. While these are good results, what occurred operationally is far and more important and impressive in that it sets up the balance of the year. This was the second straight quarter of stable sequential ARR growth following 3 quarters of headwinds. Looking beyond the ARR stability, the mix of what's driving our growth is shifting in a very positive way.

As Tom highlighted, we launched key products and provided customers with early access to new technology. We anticipate that these new products will be key contributors in the second half of the year. On prior calls, some of you have inquired about what happens after the Insights migration runs its course.

I believe we've started to answer that question this quarter with new products, including a very strong AI offer that will increasingly contribute to net new ARR. By the end of the year, as we shared on our last call, we expect our growth products will account for close to 20% of our ARR. While we believe 2026 will be a good year and one where we reaccelerate growth, we're excited for 2027 and beyond.

Let's take a look at ARR by segment. The Americas represented 53% of total ARR, while EMEA represented 35% and Asia Pacific represented 12%. In terms of growth rates by geography, the Americas grew 18%, EMEA grew 25% and Asia Pacific increased 21%. From a product perspective, our growth products, which include Guardian, Pathfinder, Corellium and our drone forensics doubled on a year-over-year basis.

Across all of our regions, the engagement with national and federal level agencies caught my attention. Equally, I'm encouraged by customers who would like to adopt our platform and their request to ensure we include our new AI product in upcoming proposals. While it's early days, the indications of strong product market fit are evident in many of our platform and AI conversations. This corresponds with our investment strategy and the continued openness of our customers to cloud-delivered solutions.

In terms of revenue, we reported $128.3 million, up 19% in Q1. Total subscription revenue grew 23%, which was partially offset by an anticipated decline from our nonrecurring training, hardware and professional services. Our Q1 gross profit increased 21% to $110.2 million, which represents a gross margin of 86%.

First quarter adjusted EBITDA of $30.6 million increased 29% over the prior year, and the margin expanded by 190 basis points to 23.9%. We achieved this level of profitability despite the FX environment and absorbing a full quarter of Corellium costs. Headcount was 1,271 employees at the end of March. We reported first quarter operating income of $28.6 million and net income of $30.6 million or $0.12 on a fully diluted basis.

Turning to the balance sheet. We ended the first quarter with $535 million in cash, cash equivalents and investments. This is essentially unchanged from the end of 2025 due primarily to the acquisition of SCG Canada. For the trailing 12 months, free cash flow grew 19% to $159 million with a 32% free cash flow margin.

Let's turn to our outlook. Overall, our initial thesis for the full year 2026 is unchanged. We always knew Q1 growth would be modest given our seasonality and a small population of expiring contracts. We have increased confidence in our 2026 outlook based on the expanded portfolio, building momentum, platform RFPs and overall pipeline.

Looking at the second quarter, we expect ARR in the range of $510 million to $513 million. This represents net new ARR in the range of $17 million to $20 million. It's a significant step up from Q1 and represents approximately 50% sequential growth at the midpoint. In particular, we expect to benefit from a full quarter of availability for some of the newest products we've introduced, such as our Advanced Unlocks and Guardian Investigate offerings.

As more customers expand their subscriptions to include our cloud and AI products, it will create a stronger foundation for durable ARR growth. It also will lead to more ratable revenue recognition. In terms of the Q2 outlook, we anticipate second quarter revenue in the range of $130 million to $133 million, an increase of 15% to 17%.

In addition to the growing base of ratable revenue contracts, we also expect nonrecurring training, hardware and professional services to be flat in line with prior periods and the ability of our ecosystem to support our customers. We anticipate adjusted EBITDA in the range of $29 million to $31 million with a margin of 22% to 23%.

It's important to note that this outlook factors in FX headwinds, which is estimated to be approximately 2 points. It also includes our annual expanded C2C user conference and our regional launch events. Overall, Cellebrite delivered solid results in the first quarter with substantial progress to enhance and broaden our solutions.

More importantly, we're shifting gears to drive the second quarter with a range of exciting opportunities to accelerate ARR growth, deliver strong operating results and generate healthy free cash flow that supports our Rule of 50 track record. We are excited about our prospects over the coming quarters and the benefits that our newest innovations will deliver to our customers and the communities they serve worldwide.

Operator, that concludes our prepared remarks. We are ready for Q&A.

[Operator Instructions] We'll take our first question from Shaul Eyal with TD Cowen.

Thanks for the expanded color on AI and the opportunities down the road. Tom, 2 questions here. First question, slightly more near term in nature. Could it be that some customers triaging with Genesis and some of the newer products are putting additional Cellebrite core investments on hold temporarily?

No, we're not seeing that at all. We don't anticipate that at all. It's all part of the value -- if you think about the value chain here, first, a year ago, we expanded from sort of the post-bang crime to include intelligence and prevention assets like Corellium. But if you think about the value chain in the classic sense, it starts with the collection of evidence and artifacts and extractions, then collecting that and securely storing it to allow collaboration with rigid chain of custody.

And then the back end, sort of at the end of the day, the message is what good does all that information do if you don't -- if you can't process it. And the amount of information that's getting digitized right now is skyrocketing. You start thinking about sensor data, start thinking about surveillance data with drones. I mean the list goes on and on.

So the mountain of digital evidence and artifacts is exploding and the number of investigators and detectives that have to try to process and analyze that mountain isn't growing. And so the only way to effectively leverage that -- all those artifacts and bring justice and safety to the world is to apply the amazing capabilities of AI.

So no, there'd be no tendency, no desire, no inclination to stop extracting and collecting evidence nor to store it safely to collaborate. This is just -- it's sort of like the holy grail ending to the story to convert all that information into actionable things that make the world safer.

Got it. That makes super sense. And as my follow-up, so back in March, as we all recall Anthropic's Claude Mythos sent shivers in the market. It would appear that so far, maybe little impact on most security-related companies. Do you see Mythos as a big deal for vulnerability discovery, Tom?

Mythos will help with vulnerability discovery. That's its intent. But a different question is, is that a headwind, tailwind or a nonissue for us? And pun intended, since you said it sent shivers, I'm going to give Shiv, our new Head of Product and Technology, who's got some deep thoughts, no pun intended there either, but to offer sort of why this is not a threat to us. And we would argue in some ways, the advancement of these AI capabilities, we think we can harness and turn into a positive.

Yes. Thanks, Tom. Before I answer that question, let me just introduce myself to everyone. Really exciting to be here, and congrats to the team on delivering an amazing quarter. It's a great time to join the company on such great results. So first, I just wanted to share, I'm really inspired by the company's mission and foundation. First, what's compelling to me is a combination of market leadership, highly differentiated technology and a customer problem set that is only becoming more strategic and frankly, way more complex over time.

You can see the scale and volume of crimes and the need for investigations is only going to increase, and I believe Cellebrite is uniquely positioned to lead. So the opportunity to further accelerate innovation across the platform, particularly on AI, automation, investigative workflows and cloud capabilities is incredibly exciting. So I can't wait to kind of dive in. I'm still in listening and learning mode, obviously, but incredibly energized by what I'm seeing so far and excited to partner with the team to help drive the next chapter of growth and innovation.

But to get to your specific question, so as Tom mentioned, obviously, Mythos will help with the vulnerability research. But there is a fundamental difference between finding a vulnerability and building a reliable, forensically sound path to extract evidence from a device. And so Mythos obviously helps with vulnerability discovery and accelerate that, but it's just another incremental step on a trend that the security community in AI has pursued with AI for years.

So anyway, turning weakness into a working, repeatable core defensible access technique requires deep expertise across networks, hardware, firmware, operating system layers and application encryption. This is the core of our differentiation and technology that we've built over 2 decades.

An LLM with a USB cable is not going to replicate this. So I think Cellebrite's proprietary hardware-enabled solutions continue to deliver proven forensically sound access across devices and encrypted applications and will continue to do so for the foreseeable future.

We will move next with Jeff Van Rhee with Craig-Hallum.

A couple for me. First, just while we're on the AI topic, with Guardian Investigate and Genesis, you've got a lot of new products. It involves figuring out how to reach the right people in the investigative unit. It involves them finding budget, buying a product maybe they've not bought before.

Just talk about the process and the learning curve and where you are on that curve in terms of your conviction that, a, a really great set of products, which I think is -- you've offered some pretty convincing evidence of how you translate that into the revenue, whether the customers have the budget, the ability to find it, et cetera.

Yes. Well, one is great -- there's -- you know the notion, Jeff, of a PLG motion. In a way, even though this isn't a PLG product, this product is so powerful that we are convinced one thing that will happen and which is why we love the fact that we've distributed this to over 500 registered users out of the gate.

The word of mouth, we also had people give testimonials. I know you weren't able to make our C2C conference, but we had some of these early adopters get on stage in front of 1,000 people and talk about how they solve crimes in literally a minute and 12 seconds in one case was given as a specific example versus weeks of investigative work. And I think it is just so powerful that -- and that community is big, but it's small.

And so we think word of mouth of the power -- and the thing that's super powerful about Genesis is if you talk to people that use it, they will tell you, we've played with -- I went into ChatGPT and I asked question A, B or C. And candidly, what I got back was a pile of c***. And a lot of them have told us, and when you told us about Genesis, we're kind of expecting the same thing. And then they deployed it, and they were blown away by the speed and the quality of the data they got.

So one, we'll obviously do our part with go-to-market, both from a field direct motion into the investigative world and leveraging the 7,000 institutions that already depend on us. David G and his marketing organization will do its job to get the word out. But ultimately, I think what will happen the best is the early adopters and people that are using it will show up at their own conferences and talk about the exponential power of productivity and speed and accuracy.

And I keep using the word accuracy because this is not like recommending that Suzie wants a blue sweater or helping you book a trip to Bora Bora. These are people's lives that are at stake and getting it right and having the right guardrails for both ethical use and how this information is obtained and derived and is backward traceable and has human in the loop. Those are all critical design points that some generic LLM is not going to provide in the marketplace.

So I think this is -- when we talk about adoption of this, this industry has a tendency to overestimate the speed of adoption of everything. We -- for those of us that have been around a while, every time there's a new thing, the Gartners of the world would come out and say it's all going to be adopted and deployed in the next 24 months, and it actually takes 5 years.

This is something that I actually think is going to be the opposite. This is going to go faster. This is going to be a match and a haystack given the power of it. So that's the penetration side of it. And then Marcus is the CRO, he's chomping at the bit to tell his story.

I'm just going to give you some data facts here. So the good news is our reader product in the market is used by at least 100,000 users, predominantly detectors. So the other thing is anyone that's sold into this space is a fraternity. And so like a fraternity, it's hard to get in. But once you're in, there is a level of trust that we've built over 2 decades. And so our access to chiefs and heads of departments has never been better, and we are more relevant than we've ever been.

And then the third data point is with my partner, David G, in marketing, we've run a number of user events across the U.S., and we've touched a minimum, and I'm going to quote it now, and I might be perfectly inaccurate of something like 8,000 to 10,000 detectives in this year in terms of presenting our solutions. So we don't have a problem with access, and we're super excited about the momentum that we've already built.

And I'll just add on, we've said this before, but for the benefit of the listeners, there's roughly a 10:1 ratio of detectors investigators to forensic examiners. So if we show up with a powerful market-leading tool for that community, just from a -- even though this won't be persona priced, the persona here is 10x the audience we've been chasing, which is why the TAM for this thing is huge and some of our assumptions, I think, assume modest penetration in a huge amount of potential and upside for Cellebrite.

And just to add, so we can see our funnel on, it opens up the prosecution market for us in a whole different paradigm as well. So it can be used on both sides. And we're super excited about our progress. A number of early users are on DA as well.

We will look next with Bhavin Shah with Deutsche Bank.

You talked about the spring release kind of giving you market-leading unlock capabilities. I know it's still early days, but David, maybe can you provide some insight into how it's driving further unlock purchases thus far and kind of what's embedded in your expectations for the rest of the year?

Sure. How about I'll give you my perspective, and then we'll have Marcus weigh in as well. I guess we looked at it from the standpoint that I think we've been communicative with customers on unlock and effectively how are we doing our unlock technology to align with the latest versions. And I think, quite frankly, we're pretty encouraged by the way it's being incorporated into the platforms.

And so that technically -- the Advanced unlock technology probably landed for us in the final 10 days of the quarter. We're real pleased with how the initial kind of request came in. We're more excited about what we're seeing for both the June and the September quarters. And so I think it's going to be a logical attach. And quite frankly, it will work really well with some of these platform deals where you have Advanced Unlock at the beginning of the process and Genesis AI at the end of the process. So we're pretty encouraged. But Marcus?

Yes, I'll echo David's comments. We're very motivated with the early doors on our Advanced Unlock program. We exhibited 2 things. The interest level is incredibly high. The number of proof of concepts. The good news is a sales leader, the proof of concept is very simple. You connect a phone and it unlocks it.

So you're not pull in what I call proof-of-concept help. And we are then able -- we've shown some pricing power there as well. So as you know, the world of vulnerabilities becomes a relatively expensive thing to do, and we've been able to exhibit our pricing power and add value, and that's very impressive, and we see that continuing for the rest of the year.

By the way, we can't name -- I mean, we can't give details, but there was a very high-profile event in the news in the last month or so where I'll just call it, federal intelligence agencies had a desperate need to access a current -- very current phone from a hardware and OS perspective that was only available from Cellebrite. And we helped that agency get into that perpetrator's phone almost immediately and help solve a very high-profile case very quickly.

And I wish I could tell you more. You can try to put 2 and 2 together, but it's real. And the other thing, by the way, that this does is -- and Marcus can comment on this. We haven't spent a lot of time on the D&I space. But more and more of our customers are starting to look at a true platform decision -- so now, if you're looking at a platform for -- to combat nefarious actors across the spectrum of digital and cyber initiatives, having a best-in-class access and unlock, a best-in-class extraction and decoding, a best-in-class drone forensics, of the Corellium asset, the Guardian, the Genesis, the kiosk for integrated sort of in the field point of engagement, we don't think there's anybody in the industry that can bring that range of assets together for some of these customers and a lot of those are government that want that capability from end-to-end to help secure citizens and national security.

Yes. And I think that's evidenced when I started, we were -- most of our customers were point products, and now that's very unusual. Most customers, majority will be at least 2 products and some of them will be whole platform, and we evidenced that quite substantially.

We will move next with Brian Essex with JPMorgan.

Really nice results. Maybe, Tom, for you. Really appreciate the kind of like the new investigative AI can that you flagged. Could you maybe talk about some of the assumptions behind that? I mean, substantial given the current just under $500 million ARR run rate in the business, but you mentioned you could double the size of the company.

Could you frame out maybe the price times quantity that you get to kind of build up to that number and how we should think about the rate of penetration there?

Yes. So the good news, Brian, is we had multiple people take a run at this, which I love. I had my product and strategy guys take a run at it. We had marketing run at it, Marcus and the sales teams ran at it. They all came at it a little bit -- a little different way. And it was one of those things that you love where they all almost landed independently around the same number.

And so the $12.5 billion that we shared to give you probably the simplest of the multiple versions is we estimate that there are roughly 500,000 detectives and investigators out there. And if you figure what those people make, you can't charge equal of their salaries to make them more productive, at least not now, maybe someday, but for the next probably 3, 4 years, no. But you'd say, if we could make those people 10x more productive, would you spend -- if they're making $120,000, would you invest $20,000 or $30,000 to increase their productivity by 10x.

So if you took just the 500,000 detectives and said $20,000 or $30,000 for AI to make them that much more productive, that yields the $12.5 billion. If I was being overly bold and aggressive and said, we believe that we are by far the best positioned to provide this capability. Therefore, we should get at least 50% of that market. That's $6 billion. Instead, we said, let's be conservative here and assume we get 5% of that $12 billion, which is $600 million, which is about equal to our current full year ARR forecast. And that's 1 of 3 different ways we sliced it, and they all kind of come up with the same answer.

We will move next with Eric Martinuzzi with Lake Street.

Yes. I know you talked about the Genesis product being consumed on a token basis. But just in the early days here, you can obviously move the needle towards adoption, you can move it towards monetization. How have you been handling it with the beta customers? Or have they been on a kind of free trial basis?

Yes. Great question. The current users are free by design. We wanted to distribute it and get some early feedback. We had no idea we'd have 500 people say, I want to try it. I'm in Washington, D.C. I'm going to see customers tomorrow that very senior people of large agencies that want to talk about -- by the way, we don't just give it to everybody. We're selective. So we probably could have distributed it to more, but it was free, and we told them you can play with it for free until it goes GA at which point in time, then you need to pay.

And the part that you couldn't do that if it wasn't so easy to deploy to literally turn on a tenant and just turn it over to a detective and he just -- he doesn't even have to start typing a question. The engine gives them a prompt to say, here's the first question you might want to ask. And you just start asking questions and getting answers and there's no training involved. So it's free.

Now your next question is when it goes GA, how are you going to think about monetization? And what I've told the team is whatever number we come up with, it's going to be wrong. We're either going to underprice it or overprice -- the market is going to be hugely dynamic, but we're going to err out of the gate on being aggressive with pricing because our goal is to get this distributed broadly across the entire -- we believe that once anybody touches this product, they will never give it up.

So this is an example of where the seating strategy, I wouldn't call it -- we don't want to make it a loss leader because there's cost involved here with tokens, but we're going to price it as aggressively as we can to make it easy for everybody to adopt. And then once they have it, they see the value delivered. And by the way, we talk about efficiencies. What really resonates with politicians, citizens, police chiefs, commissioners of 3-letter agencies is when you actually save a life, rescue some child exploitation victim, break up a fentanyl ring, stop a terrorist cell.

And by the way, the people that have sent us notes have done all those things. I could have read you another dozen e-mails that I did that touch on counterterrorism, child exploitation, kidnapping, torture, homicide, literally where Genesis has solved those cases in a matter of minutes or hours that would have taken weeks or months.

I'd also add that I think everyone on both sides of this call, this is a path well trodden, and I can't believe anyone on this call is not using the monetized and paid version of their own Frontier model. So we all started with the free and very quickly, we realized the productivity gains and moved to the paid because the benefit is so high. It's exactly the same for our customer base.

We will move next with Mike Cikos with Needham.

Dave, I think this one is for you, and it's really around the net new ARR. We're looking at this $12.2 million, call it, flattish year-on-year. I'm hearing all the positive data points, right? We acquired Corellium in midyear, that's been on fire. The federal is rebounding. You guys have these multiple momentum drivers here.

And I'm just wondering, did any deals potentially push? Is that helping you underwrite the Q2 step-up in the net new? Or is there something that I need to think through there?

Yes. So Dave is pointing to me to take that one because you're asking about the sales push. So yes, look, we did. We had some things pushed. Q1 is historically one of our most difficult quarters. There are no -- globally, there's no budget cycle ends except Australia, which is the one that you see, which doesn't move the needle for us. So we had deals increasing in size and complexity with some push. We were still picking up the tailwind of the federal business pricing.

As you probably know, if you follow the press, HSI's pricing was only just -- the budget was only just approved literally in the last few days of the quarter. As we move more into the D&I space, we move into much more sequential growth in Q2 and Q3 as the project scale. So there was some push and -- but nothing was lost. And so that's why we feel good momentum going into Q2 and Q3.

And then maybe just to complement, I mean, I think when you look at our -- and I put it in my prepared remarks, but our pool of expirations was just unusually small.

That's right.

And so I mean, with a customer-based selling motion, I think that kind of played on it. And then the other thing, just mathematically, one of the elements when the new products hit in the final 2 weeks of the quarter, I mean the ability to fulfill orders was a little bit.

Yes. And the one thing, too, and I know we're going to run out of time. The one other thing that makes us bullish about where we're headed is Marcus is starting to prosecute and navigate deal sizes, in particular, in the federal space that are bigger deals than we've ever seen. And I'll just leave it. We're talking big deals.

Yes. There's another little nuance as well that actually happened is some of the large frameworks change their very nature and they push them down to the region. So what can happen a lot in federal is that what was once done as a single order in certain agencies can be pushed to their regions to follow up.

And so the good news is we actually have some win backs, which are going to start hitting from delayed budget. The other problem with the unique way that public safety is funded, if you significantly increase a deal, they often have to go and secure other budgets from other areas, which can put a slight delay into the process, but that's far better than trying to renew on a flat basis, trying to increase the revenue on it.

We will move next to Jonathan Ho with William Blair.

Congratulations on the new product releases. I just wanted to better understand the spending environment and whether you see any potential pressure just from the macro events that are out there as well as your thoughts around any potential for benefiting from a budget flush as we go into that Q2, Q3 period.

Yes. So no global events actually are a tailwind for us, unfortunately. So no negative impact of the Iran war on our business. There's some in Asia, I think Marcus can talk, I think, in India. But generally, no. The counter is we have better visibility to specific appropriations that Marcus could also add color to.

I think it's part of public filings if people want to go look. But more than at any time in the history of this company, there are specifically passed appropriation bills now that target our solution. We just got to go convert and execute them. So we're -- to the contrary, the environment and the shift that's happening in global warfare and geopolitical instability, border issues, the whole issue around drones. I mean, it all plays to our strength and capability and is a tailwind, not a headwind.

Yes, 100%. The expansion in the D&I budget is hyperbolic in terms of what we do. So we're seeing great growth in that area. The other thing, as Tom said, on the appropriations, our most successful year on appropriations, you can look at the FYSA websites and see them in excess of $30 million extra just in a few agencies in the U.S.

And now we're not mentioned by name, but if you read what the solutions they are going to buy, i.e., an ATO approved storage solution, we feel very confident in our position in converting those appropriations into significant increase for our company.

Yes. And just to underscore there, in our space, nobody is FedRAMP Level 4 certified. So if you want a cloud-based forensic solution, we're it.

Don't be confused by in process. In process can hang around for 3 years. Actually, having the ATO is the important thing to be able to place an order.

This concludes the Q&A portion of today's call. I would now like to turn the floor over to Andrew Kramer for additional or closing remarks.

Thank you very much. This concludes our call. I'd like to thank everybody for their participation. We have a pretty busy next several weeks of conferences and NDRs. Hope to see you out on the road. If you have questions and want to do follow-up, please reach out. Thanks again.

Thank you. This concludes today's Cellebrite First Quarter 2026 Financial Results Conference Call. Please disconnect your line at this time, and have a wonderful day.

All right. Welcome. Good morning, everyone. I'm Melissa Knox. I run the Global Software Banking business here at Morgan Stanley. And I am extremely excited to be here with Dave Barter, CFO of Cellebrite. Cellebrite is a leader in digital investigative solutions to state and local governments, federal agencies, enterprises and has had a tremendous run. So we'll talk about how the stock has performed, where you are today, some of the new solutions that you have out leveraging AI and data.

First, Dave, just give us an overview on the products that Cellebrite sells. There are 3 of them, 3 kind of main products, but why don't you go into what you're selling on the Case-to-Closure platform, starting with digital forensic software, your Inseyets product.

Super, and good morning, and thank you so much for having us here today. This is always great to be here. When you look at Cellebrite and our role in law enforcement, as Melissa highlighted, there's the Case-to-Closure platform. And that Case-to-Closure platform, when we think about law enforcement really starts with the idea around the mobile device and specifically the idea that when you're looking at a crime, the mobile device tends to be the richest source of information.

And so our spectrum really runs starting with if you need to gain access to a device, which happens about half the time, somebody is not willing to give up a password. And so that's where we can actually step in. And so we have a pretty unique set of technology around the vulnerabilities around access, whether you're talking about a Google-based device like Android or you think iOS, even going out to Nokia and some of the feature phones. And so we have that ability. We understand the vulnerabilities, and it's usually not one vulnerability, but it's a series of vulnerabilities that lead to what we call an exploit.

And that actually allows us to gain access to the device, but that's usually not the whole answer. Usually, there's an element around how we run a full file extract. And you might look at your phone and say, well, gosh, it only has a little bit of the data on it. And that's generally true. You have a lot of cloud services that are linked to your phones. That's exactly where we kind of kick in and we help scrape everything that might actually be on your device or linked to your device. And that becomes the basis of how people start to approach an investigation. Then we really see...

And that's really hard to do. So just that in and of itself, taking the data off the device, this can be encrypted data could have been deleted, it could be hidden. It doesn't matter, and it's in different formats.

Exactly. It could be everything from your signal or your WhatsApp or telegram to some of the more esoteric ones where people are using to communicate. And so one of our superpowers is, first, the ability to go in and scrape, then you actually start to go through the decryption process, the decoding process. And so it's a series of steps that ultimately in the form of discrete exploitations that allow us to actually start getting that information, organizing it and starting to convert it into insight.

So that's really, I'd say, kind of trick 1 and trick 2 are pretty powerful tricks. That kind of leads you into trick 3, which within the Insights product, we have a component called physical analyzers is where the AI starts to kick in, where we get into image identification and classification. And it's very -- think of it, if you're in law enforcement, if you want quick actionable insights, that's where AI really comes in quickly.

Now if you really want to get -- kind of start to progress through the suite, this is where we start to take, go from digital forensics into the investigation side, and we have a case evidence platform called Guardian. So Guardian has that ability to store all of your data, so you maintain chain of custody. So if you're concerned about a lawyer coming in and starting to press because there are some savvy defense attorneys in the world, but this gives you full chain of custody to be able to go from that mobile phone or all the cloud services into starting to think about investigating and prosecuting somebody.

So having the data repository, it does allow you to collaborate that allows you to share from an examiner to a detective to now you're starting to think about a district attorney or somebody who's going to be sitting in the courtroom. Within that, you're also starting to look at advanced cases around AI. And this is where it really, I'd say, it starts to change the game for the company where within that Guardian product, there's an AI viewer. It really does advanced image classification. It also gets into starting to connect threats.

And then we really, I'd say, start to wrap up our suite with Pathfinder. Pathfinder is an analytical platform. It's designed for 10 phones to hundreds of phones where you can really go through and upload information if you're thinking about a fentanyl ring, if you're thinking about gang activity, maybe you're thinking about something that involves prisoners trying to run and exploit and where you're getting access to hundreds of phones. Pathfinder has a lot of superpower in it in terms of it is AI because there is a strong AI component to it where you're starting to be able to do translations.

You can imagine a variety of languages. You're starting to an element of -- there's a translation element of if people are speaking slang, it actually starts to really decrypt a lot of those threads very quickly.

And then I'd be remiss if I actually didn't speak about Corellium, which we acquired on December 1. And then most recently, as of a couple of days ago, we are now into drone forensics. And so we're super excited about that, just given, well, everything you're reading about now, that's becoming a real vector for all of law enforcement.

You're selling a lot to these agencies. How do you sell? Is this cross-sell opportunity? Do you come in with a platform? Or are you buying these different modules and cross-selling?

It's a great -- I think this is one of the elements that we love so much where we have such a deep set of relationships. And so every quarter, we certainly add logos. Those tend to be smaller ads where it's somebody where within -- potentially a branch office, they have a colleague, they need to start actually having forensics capability. And so our initial land may be $10,000. In some cases, a little bit more. Occasionally, somebody who knows us well because they've used Cellebrite before might actually start a little bit larger.

But principally, it is just continuing to expand. And so whether you think about FBI offices or any police department, they usually have to -- from a budgetary perspective, they got to start somewhere. And then as they're actually getting value, it actually enables them to start expanding. Now we are starting to actually play with some new tricks. And so having been in the PLG motion before, we are starting to open up some products as we're rolling out some new solutions like our Investigate product that's purpose-built for detectives and investigators.

We've actually just started to give that away, and we give it away in the form of using customers as design partners. They're going through and helping us harden it. And we kind of stumbled into the motion when somebody said, you wouldn't be offended if we actually started solving crimes with your software. And we said, of course, not. I said because we've already started.

We started. And let's talk about some of the crimes that are -- sorry...

Well, and that's what we love. And so as we see some of our new Agentic solutions where people are solving crimes, we are in this new phase of actually starting to experiment with a PLG or a free tier where design partners are actually hardening the solution. They're starting to solve crime, and that's allowing us to invite others in to go do great things for the community.

And the use cases are quite broad. When you think about what you're solving or what some of these agencies are solving, there are some of the most high-profile cases that are out there. The Nancy Guthrie kidnapping case is being run on Cellebrite, the First Trump Assassination, the Brian Brian Kohberger, Idaho Murders. These types of cases are being worked on with Cellebrite. So just talk about the expansiveness of the use cases. What can you uncover here?

The element that I maybe, I guess, is kind of touching us is there are no limits. We had a customer. They have been a long customer and they started to expand actually in the platform motion that we were describing. They said, gosh, we brought this new product from you, and I got to have to protect the customer because they said at this point in the investigation, they just asked us to be a little bit more -- just more reserved in our comments. But they said, we bought this new product from you in December.

The first case that we put up, we put it in -- used the AI components of the product. We quickly found that there was a class of people in their community that were being exploited. They quickly used the AI to identify more and more victims. And then they ultimately actually through all of the AI components and the amount of data that they were able to scrape, actually realized it became an international crime. And within 24 hours, they were able to go from country to country and found the -- they apprehended the person, but they were able to, quite frankly, solve a case that before would have been almost impossible to get after. And that's what we're starting to see with the solutions as people get engaged in the platform.

Just let's double-click on the AI component here. So you talked about the data. Talk about what you're collecting. This is not -- clearly, this is super proprietary. You're taking it directly off these devices that can't be accessed. So the elements of the data, the relationships because you're not -- it's not just what's here, but you're able to then use external data as well to form relationships, what people are doing on social media sites and kind of build a web of connectivity. So maybe talk about the power of the data, the proprietary nature of it, the actual AI that you're using. So are these your own models that you're using third-party models? And then as it gets incorporated into the products, how you're monetizing that?

I think that one of the elements that's probably not well understood about Cellebrite is that even before you get to data, there's almost -- there's an infrastructure play to it. And so when we think about a device and what's going on, it's not a USB-C that goes in, we actually have specialized appliances, no different than the drone forensics company. Drone Forensics has its own dedicated appliance for which we actually start the basis of what's the exploit that's going to remove the information to start getting it.

And then as we talked about frequently, there is elements of encryption that go with that data. And so it is a -- I'd say Cellebrite is a little bit unique in the sense that you start off with an appliance, you go into some pretty unique pieces of data because it is encrypted, and you have to go through an exploit process to actually start to unlock that data. Then it does become unique data in the sense that when we think about our job, our focus is both lawful investigations, and we also think about it in terms of ethical AI.

And so to get our information, you are going through a search warrant process with the folks that we actually partner with in law enforcement. And when you think about a search warrant, search warrant isn't blanket data. There are a number of restrictions that go with that data. So learning how to work with that data is -- tends to be a very important one because it could be time to limit it, it could be space. There are a variety of elements that go into that warrant.

Let's talk about that. So there's concern, obviously, over surveillance, and you're in the forensics piece of it. So talk about the lawful nature of this and when you come in and how you differentiate between surveillance and forensics, how do you get the approvals to go do this? What's necessary?

Yes. So what we maintain, and it was actually an important element for me when I interviewed with the company was learning, we're actually not trying to be an enterprise software company where we might sell in 180 or 185 countries. We actually have our own specific KYC policy that we use, and that KYC policy runs by country, by customer. And so our general view is it's actually pretty important to us of whom do we sell within law enforcement. But equally, I'd say we apply this to defense and intelligence.

And so as an example, we're very specific around, for example, customs and borders, okay? Well, that's a use case that makes a lot of sense to us. And so when we think about officers that are at the border who need to be able to extract information from somebody who's trying to immigrate or go through the customs process. We think of that as an area where it's very lawful for a customs official, which happens regularly to be able to say, gosh, may I please see your phone. I would like to learn a little bit more when somebody is going through an investigation.

Clearly, that person has the ability to refuse and say, I'm not going to give you my phone, but -- and that obviously takes them down a different path if they're probably not admitted to that country. But that's generally our approach is we think there's a lawful way to engage, whether you're on the law enforcement side or on the defense intelligence side around protecting communities and protecting nations.

You generally need to have a search warrant or the owner's consent.

Exactly. And that's actually maybe a great segue even in our enterprise business where it's less than 10% of our business. But if you were a Fortune 2000 company or even somebody like a Deloitte or PwC, we will sell you solutions. We won't sell you the ability to unlock a solution. So the unlock technology is very reserved for very specific people who would say, gosh, we think you're going to be upholding our KYC policy and our ability to approach lawful investigations.

And so if you are at a Fortune 500 company and you're doing potentially a cyber investigation, well, as long as you have employees access, then yes, we'll give you access, the ability to run a full file extract and find out, gosh, was your network compromised or was somebody's device compromised?

And what sort of relationship do you have with Apple, Google? And I know you're making investments in Android right now to kind of go after that operating system even more. Just talk about where you are with the different operating systems and how those companies view you?

Well, it's funny. I think our CEO was with a senior member of the Apple staff not too long ago. And I think it's one where there is an element where from an OEM perspective, I think both Android and Apple do go out and say, gosh, trust and privacy is important. At another level, I think they look at what we do for a living as, quite frankly, very complementary to what they do because it allows them to proceed in the market with their brands. But at the same time, I think I've never talked to Tim Cook or Sundar about this. But I have -- my sense is letting -- being -- assisting criminal activity is not high on their agenda.

And so I think it is, to an extent, a very complementary relationship in terms of, I'd say, what our engineering and software development does vis-a-vis what they're trying to accomplish. And I think it's one where, I guess, maybe to your -- kind of your point, we've always been the market leader on all Android. I think when it comes to iOS, I think we have a good #2 competitor in the form of Magnet, where it's a little bit of a cat and mouse game with Tim Cook. And then I think when it comes to Nokia and feature phones, we tend to bat above our weight as well. And so I'd say in 2 of the 3 areas, I think we're the undisputed leader. And then certainly in iOS, it's -- Tim Cook keeps us all working pretty hard.

You and everyone else. So let's get into your customer base. So 7,000 customers across local police departments, federal agencies, governments, kind of what's the breakout within the group? Who are you primarily selling to? You said 10% enterprise, but between kind of the local police departments, federal government, what does that look like?

Yes. So it's interesting. I mean here, we sit in San Francisco, they are a wonderful customer of ours, and you can almost go from Sacramento all the way down to San Diego and you find actually a lot of Cellebrite customers.

There's nothing but opportunity in the city of San Francisco.

Well, I think the mayor are doing a really nice job, and we hope to continue helping them. It's -- the interesting part about our business that most people actually don't appreciate is it's actually to your -- maybe your suggestion, state and local government actually is the biggest part of our business. And so that is actually where we really shine in the sense that they have the greatest needs. And so that tends to be that area where we do land and expand. And so that's been -- it actually grows faster than our federal business, and it's an area where we find a tremendous opportunity.

It's actually what compelled us to think about getting into drones because with the Open Skies Act and the fact that now cities and municipalities have the ability to start running their own drone programs, we think actually that's going to be a tremendous opportunity for us to be good local partners. And so for us, the strength of our business really starts off on state and local government. We do very well at the national level.

I think we talked about that being within kind of the U.S. and Canada, which we refer to as our North America federal business, that tends to be about 20% of our business. But just across the globe, state and local governments or provincial governments or if you think about the U.K., they have about 55 to 60 kind of provincial operations. And so each level of partnership at that level tends to work really well for us.

And what does it look like when you come into one of these government agencies' police department? Are you replacing something that's there? Do you work side-by-side with other things and start adding over time? But just talk about kind of what the landscape looks like and what the land and expand is.

It's funny. Over the last 10 years, I think that's been really -- maybe the birth of the industry in the sense that if you go into any major police department 10 years ago, it was whiteboards and forensics was something that somebody was probably doing in a supply closet where they were just getting into the business. And now forensics actually has a prominent place, but it is continuing to crawl across. And I think the -- maybe the great observation that somebody had made, and this was several years ago when the Trump Assassination occurred, it took 4 hours to drive the phone to a place where the forensics could actually start.

Now I'd say with the rate and pace of crime, I think every police department is looking for having advanced capabilities at their fingertips. This is becoming in terms of the ability to solve crime, having access to that almost instantaneous insight is where people are going. And it's one of our account -- just maybe to kind of play this forward, one of our AEs was -- we were just debriefing on a recent visit. And he said, gosh, I was visiting with the prison system of a major state. And they said, what we really want is the ability to have instantaneous insight. When a [ parole release ] sits down, we would like to be able to run that phone through our forensic system and be able to know within 10 to 15 minutes, have they violated their parole or not.

And I think that's increasingly just kind of the vector of how people are pursuing, whether it's customs and borders looking for instantaneous insight, a detective being able on the front lines when an accident happens. One of our great customers said, we're pretty good at our jobs. When we ask for phones, we normally get them. And so people are looking for that level of immediate insight to go track signal versus noise, where do I need to go focus because minutes and hours matter so much.

And that, I think, is what actually compels people where they actually say, and this is maybe the network effect of a Cellebrite of, hey, I've been able to celebrate a phone. I've been able to celebrate a report. The brand starts to actually kind of carry through the system of law enforcement where...

It's a verb.

It's -- Cellebrite may not make it to cocktail parties, but I guess within that community of law enforcement...

We're going to start it now, start the trend. We're going to celebrate our phones. Any questions on the business? We're going to turn to business model financials. Questions from the audience on the core business? Okay. Why don't you talk -- let's talk a little bit about the business model. And you've had some changes from legacy products into Inseyets and from on-prem to cloud subscriptions. And so just talk about what the business model is today and kind of where you are with the migration into the Inseyets product.

Well, let me -- even before I go into Inseyets, I think one of the things that is probably least understood or appreciated about Cellebrite is the fact that the company, if you rewound the clock over 10 years ago when it really got into this business, actually started off as a perpetual business. And then ultimately, the company kind of about halfway through went into term licenses. And lately, as we think about everything that we're doing on our case evidence platform, it's all consumption.

And so increasingly, I'd say the element that we've done very well is actually kind of continuing to evolve the business. One of the reasons we use ARR as the metric is the revenue ultimately reflects kind of a transition, I'd say, from a very old school company to being very -- just very leading edge in terms of being able to have a consumption component, which I think is really what sets us up nicely for being able to be able to go to customers and have an AI offer is, well, we've gotten you comfortable with meters and the idea that we will meter the unlocks and meter access to phones. We'll meter ultimately the amount of terabytes that you actually will move through because these phones are kind of beefy. They come with a lot of data. And so we've actually been able to get people accustomed to that.

And so kind of the biggest part, I'd say, is the underlying layer that says from -- if I were to use the old kind of the classic expression I grew up with licensing and pricing for us is really, I'd say, become a good discipline in terms of moving our customers through having from the single perpetual all the way to having a set of consumption meters.

Do you have predictability and upside with the model?

I would say we do. And moreover, I think what we've aligned with our customers on is value meters. And so our customers actually greatly value the idea that says, hey, I run cases. So I need to be able to run extractions or I need to be able to unlock a device, extract a device. And then ultimately, I have terabytes, the petabytes of data that is associated with cases. And so when we've gone through our pricing work as we were preparing for some of the new Agentic products, I think that was a good affirmation for us and says, gosh, this work -- the spade work that was invested on the meters actually is really starting to work where our customers are actually able to plan and think that way.

And so that actually gave us more confidence as we're starting to think about how to price some of the new offers that we're working through. At a fundamental level, there's good physics in terms of how our customers think about the world.

Can you give us some data points on where you are with some of these migrations from the legacy to the new products and from on-prem to cloud?

Absolutely. I think our shift with Inseyets has been very successful. I think over the last several years, we've gotten up to about 55% last year, about 30% of our customers moved. We kind of handicapped it this year. And my general view on transitions is that we're kind of in that phase of middle earth, and we'll figure out that it could be 25 to 30 points more could be a little more, could be a little bit less. But I think what we're intrigued about is, one, I'd say that the migration to the Inseyets has gone very well.

So that allows us to retire some of our legacy offers around the extractions and just get everybody on one set of products relative to how we think about our unlock and our access. So that's been very positive. It does come with a small ARR uplift, which we've kind of shared with investors that about out of the net new ARR every quarter, we get about a little -- about a 10% uplift when people migrate. And so this is why we really are focusing a lot on the growth engine where we think nearly 20% of our ARR will come from our growth products this year.

And so the business is really changing very quickly in terms of how much of the growth is driven by Inseyets versus some of these newer products across Guardian, across Pathfinder, Corellium, which, again, we just acquired in the drone company.

So this is -- you've told an amazing story here about a product capability platform that's really differentiated. It's hard to do. It's widely applicable to a number of use cases. You have proprietary data. And when I translate that into the financial metrics of the company, you're almost $0.5 billion in ARR, $480 million in ARR, growing 17%, 34% free cash flow margins, pretty amazing, trading at 5x revenue. So what's the group missing here? You're different. When we talk about the baby being thrown out with the bathwater, this is one that should not be thrown out. And so what does the market have wrong about the story?

Yes. I think it's -- for us, as a company that when we kind of came out to the market, I'd say we really kind of came out to the market almost just given our heritage where half of our company is Israel. I think people thought of us almost as a cybersecurity company. And I don't think they actually appreciated the elements around what does Cellebrite mean to public safety. And so I think that's the element that I think we have an opportunity to ultimately do a better job of saying, gosh, how integral are we to state and local governments? How integral are we to customs and borders and helping people protect the perimeters of their nations?

So I think we have an opportunity just to almost, I'd say, reset how people perceive us both as a vertical company, but actually how do people perceive us both as a vertical company in an AI era where I'd say a very unique appliance plus pretty unique data is translating into unique and actionable insights. And so I'd say that's the part that we're looking forward to being able to share more of in the sense that as you think about our investigator product, as you think about the Agentic products that are all in trial mode with customers, we're pretty encouraged about where that takes us.

And our general view is last year, we had a decel in the business as a result of what happened with the federal government when Trump came in and he took over Biden's budget. He kind of changed that and that ultimately compressed growth by about 4 points but, we feel like we have a pretty credible path to taking our 17% and starting to reaccelerate it. And part of that is a little bit around customers, a little bit around the products that we have.

So maybe, talk just briefly on that point, you're accelerating growth. So you've come in, you've tightened up the guidance ranges. We're guiding to accelerating revenue growth. 18% to 19%. You've committed to keeping free cash flow margins over 30%. Just what are those growth levers? How much is kind of new customers, expansion, new products? You've done some acquisition that you can cross-sell. Just kind of lay out those building blocks to accelerating growth.

Yes. That's a great question. I think when you think about it from a customer perspective, because our lands tend to be on the smaller side, new logos might represent 1 to 2 points of incremental growth in any given year. So it does tend to be more of a customer-based motion. And for us, I think I looked at it and said, I think we tried to lay out a scaffolding in the last earnings call to say, Inseyets, just because it is our largest and most mature product, I think that will continue to drive upper single digits in terms of our overall growth as we think about that 18% to 19%. But then we get pretty excited about Guardian, which has been growing over triple digits the last 6 quarters.

And so with the ability that as a case evidence platform, everyone is moving their data in, we think that data plus the AI layer on that product will continue to lead to strong growth. Pathfinder ultimately that's way above its weight in terms from an analytical perspective, and that ultimately contributes to growth. We think some of the newer products like Corellium ultimately kind of come in and Corellium has that ability to add a couple of points of growth even as a small product with $16 million of ARR that we acquired, it's growing at a pretty healthy clip and has the ability to grow almost as fast as Guardian if things work out the way we think it could. And then Drone Forensics. I mean, really very nascent business, but boy, with what's going on in the world right now, drones just continue to become more important. And so we'll give some perspective on the next earnings call.

And then I'd say the last area that we're excited about is we actually do think gross retention is going to continue to climb as we really get our plays dialed in. Last year, we finished at 91%. We think this year could ultimately be 92% or 93%. And so I think what we like about the model is there's, one, a lot of focus around our customers, but a lot of ways we win. And so I think as we thought about the scaffolding, a lot of ways to ultimately kind of get to the lower end of the guide, a lot of ways to get to the upper end and then kind of cross through it to get back to a 2 handle on growth.

Excellent. Well, tremendous execution. Congratulations on what you've built, and thank you for being here, Dave.

Thank you so much for having us. This is fantastic.

Welcome to the Cellebrite Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer. Mr. Kramer, the floor is yours.

Thank you very much, operator, and welcome, everybody, to Cellebrite's Fourth Quarter and Full Year 2025 Financial Results Conference Call.

I'm joined today in Israel by our primary speakers, Tom Hogan, Cellebrite's CEO; and David Barter, Cellebrite's CFO. Marcus Jewell, our CRO, is also participating.

This call is being recorded, and a replay of the recording will be made available on our website shortly after the call. We'll also add a transcript. Please note, a copy of today's press release and financial statements, including GAAP to non-GAAP reconciliations, is available on the Investor Relations website at investors.cellebrite.com. In addition to the press release, we posted a separate investor presentation that provides an overview of the business and our recent financial performance.

I'd also like to remind everybody that the slide in your webcast viewer is a placeholder only. There are no actual slides to accompany our prepared remarks. We also published supplemental historical financial information for each quarter of 2025 and 2024, along with full year 2023 and 2022 on our Investor Relations website.

Additionally, unless stated otherwise, our discussion of our fourth quarter and year-end 2025 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 comparable periods of 2024.

I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's business operations and financial performance. 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 the 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 18, 2025. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.

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

Thanks, Andy. I'll just jump right in. We closed 2025 with a solid fourth quarter that capped a year marked by meaningful strategic progress.

We cemented our Inseyets offering as the gold standard in digital forensics, drove strong adoption of our SaaS and cloud-based offerings, extended our integrated AI functionality, completed our first material acquisition and added important talent across the company.

We grew ARR by 21% in 2025, which factored the combination of a 4-point headwind from our U.S. Federal unit's actual performance versus our original plan and a nearly 4-point tailwind associated with the close of Corellium. Overall, our ARR growth reflects expansion across all of our major geographies and our flagship offerings.

We outperformed relative to guidance on both our fourth quarter revenue and our adjusted EBITDA.

Our growth and ongoing spend discipline delivered strong free cash flow of $160 million in 2025 and a 34% free cash flow margin.

I'd like to quickly share some of our fourth quarter highlights and accomplishments that position us for accelerated growth in 2026. First, we've now converted 55% of our installed digital forensics base to Inseyets, exceeding our 50% target and reinforcing our market-leading capabilities.

Second, we doubled down on our mobile research to ensure our unlock capabilities continue to keep pace with the major phone manufacturers. We believe these investments will extend our leadership in Android and will reassert our leadership in iOS. We expect this range of leadership capabilities will hit the market over the coming 6 weeks and position Cellebrite as both the leader across each major segment as well as the clear leader from a comprehensive cross-platform perspective.

Third, SaaS and cloud adoption remains outstanding. ARR for these offerings grew north of 50% and now represent 22% of total ARR. Guardian's impressive trajectory continued with its now sixth straight quarter of 100% plus year-on-year growth. Guardian Forensics is rapidly becoming the industry's de facto repository for evidence that matters and where chain of custody is critical.

Fourth, we completed our acquisition of Corellium in early December, while we continued our work to gain final clearance from CFIUS. Corellium's ARM virtualization technology remains an industry unique and powerful asset. Customer interest across both defense and intelligence and the private sector continues to exceed expectations. We remain confident this asset will be highly accretive to our growth and will exceed our pro forma expectations when we announced the transaction in June of last year.

Looking ahead to 2026, we start the year well positioned to reaccelerate growth with initial guidance of 18% to 19% as compared with our organic growth of 17% in '25. We see several levers for further acceleration as our portfolio and solutions evolve over the coming quarters, but chose to take a prudent approach to our guidance until these assets become generally available and we can confirm expected market adoption.

Let me recap the primary contributors to our expected reacceleration. First, core demand for our solutions remain strong. Macro tailwinds around crime, population growth, the use of digital in both the pursuit and resolution of crime continues to climb as validated in our recently released industry survey and the constraints associated with human capital persist. Unfortunately, these known, established macros have been exacerbated the past year by increased geopolitical tensions around the world.

Second, the well-chronicled disruptions in the U.S. Federal segment are thankfully now behind us. We expect the roughly flat growth performance of this unit in 2025 to reaccelerate and to exceed the company's overall growth rate in '26. There are multiple drivers that will contribute to this resurgence in growth, pent-up demand in core unit growth, increased and focused federal funding and the final DOJ-sponsored authorization to operate for FedRAMP Level 4, which we expect to obtain before the end of this quarter after a lengthy 18-plus month process. Federal ATO will pave the way for Guardian and our cloud assets in the U.S. Federal market. Augmenting these growth engines is our increased focus on more targeted defense and intelligence solutions as well as the product fit of Corellium and D&I. Given current mid-quarter visibility, we're optimistic this unit will get off to a fast start in the first quarter.

Third, we've elevated the quantity and quality of our go-to-market organization with a roughly 20% expansion in sales executives and our increased investments in enablement and training.

Fourth, within digital forensics, there are several important levers. In terms of Inseyets conversions, the value proposition of our Inseyets upgrade cycle is now well understood and many agencies have incorporated their upgrades in their planning and budgeting cycles for 2026. These dynamics position us well to drive conversions this year by an additional 25-plus percent. Just as important, based on our anticipated platform leadership, we expect accelerated growth in the unlock business as we enter the second quarter and the remainder of 2026.

Fifth, we took an important and exciting step today with the agreement to purchase SCG Canada. The deployment of drones globally is not just growing, it's exploding. The drone market is expected to grow 20-plus percent annually and surpass $53 billion by the end of 2026. Its constructive use cases are broad, ranging from surveillance and commerce to the safety of local law enforcement and national defense.

Unfortunately, drones also enable nefarious use cases. The U.S. alone reported over 1.2 million drone violations in 2025. We believe drone forensics will rapidly become one of the most significant data sources for making our nations, communities and businesses safer. Given our leadership in digital forensics and our customers' trust and dependence on our digital insights, adding drone forensic leadership was both a logical and candidly necessary strategic decision. This is a capability that will bring immediate value to defense intelligence and law enforcement agencies as well as to the private sector that's charged with securing airspace around critical infrastructure, prisons and dense locations such as airports and sports venues. This represents a modest but important move to address an emerging need and further elevate the impact of our AI-powered platform for multi-data source analysis. We expect to close this transaction by the end of the first quarter, and we'll share additional details upon closing.

Sixth, with the recent closure of Corellium, we enter this year transitioned from a reseller to a fully integrated selling motion. We're driving elevated education and training across the Cellebrite go-to-market team and customer base and see meaningful growth opportunity across both the public and private sectors. Corellium will also clearly exceed the company's overall growth rates.

We're excited and optimistic about our progress in emerging leadership in digital investigations and analytics. These strategic assets grew 2.5x faster than the overall business in 2025. Guardian Collaborate and Guardian Forensics are well positioned to sustain their 100-plus percent year-over-year growth rates. In addition to the important ATO for the U.S. federal market, we expect to obtain similar certifications in Australia, New Zealand and select European nations later this year.

We will also launch Guardian Investigate this spring. This product is squarely focused on enabling criminal investigators, detectives, analysts and prosecutors to build stronger case narratives, collaborate seamlessly in a secure workspace, leverage a diverse set of data sources and file types, including traditional smartphones, but also adding important sources such as call detail records, open-source intelligence, video, RMS, ballistics and license plate data and ultimately leveraging the most powerful AI-enabled analytics in the industry to navigate and interrogate this mountain of important evidence. Feedback from beta and customer design partners has been exceptional, and we think is a harbinger for accelerated deployment and growth in the second half of '26.

Pathfinder, our flagship analytics solution for multiphone forensics, continues to grow and deliver important levels of insight and productivity to a growing percentage of our Inseyets installed base.

And last, but certainly not least, is our progress in the thoughtful and ethical use of GenAI. We've been pioneers in the use of machine learning and AI for the past decade and plan to extend that leadership in '26. While many view AI as a threat to software, we view AI as an absolute tailwind across 3 fronts. The first is applying it across our internal organization to drive productivity and efficiency, and this initiative is well underway. Second, AI enables significant improvements to the productivity of users of the Cellebrite portfolio, which ultimately elevates our value proposition and customer retention. And third, we see meaningful opportunity to monetize unique and focused agentic applications that bring rich capabilities that transcend a range of use cases from child exploitation and missing children to cybercrime to stagnant cold cases and major criminal investigations.

I want to briefly expound on our constructive view on AI and why we view it as a force multiplier from both the business and a societal impact. Cellebrite's mobile extractions are at the epicenter of the most valuable, complex and difficult-to-obtain sources of evidence that are relevant to virtually every investigation and the corresponding power and capabilities of any AI engine. Said more simply, our unique intimacy with the most complex evidential artifacts give us a unique advantage in harnessing AI for good. That intimacy is then compounded by our domain expertise with investigative workflows leveraged by hundreds of man-years of law enforcement experience.

And finally, Cellebrite's history is grounded in the quality, ethics, compliance and security that's earned us the trust of thousands of the largest and most sophisticated public safety and government agencies around the world. GenAI can and will be a powerful force for good but the stakes involved in crime and sovereign defense demand that advanced analytics are complemented by full traceability, ethical use and human verification.

To conclude, I'm proud of our progress in '25. We navigated turbulence in the U.S. federal space while still delivering healthy growth in both the top and bottom line. Just as important, we made critical investments throughout '25 that span organic innovation, strategic partnerships and targeted acquisitions. Leadership and innovation matter, and we continue to invest in the long-term growth and leadership of this company. We enter '26 with a truly differentiated end-to-end AI-powered platform that delivers high-value insights and intelligence from an expanding range of data sources. We are already hard at work on where and how we can expand our value for '27 and beyond. We have a bold aspiration to not just solve crime with efficiency, but to ultimately drive a material reduction in crime itself. We're proud of our impact in the world, and we're anxious for the future.

With that, I'll turn the call over to Dave, who will do a click down on the details and add further insight to our first quarter and full year guide. Dave?

Thanks, Tom. I'd like to briefly share highlights from the fourth quarter and full year. ARR grew 21% to $481 million, which includes Corellium. When we closed the acquisition on December 1, Corellium's ARR was $16.1 million. Excluding this, our ARR grew 17% year-over-year and sequentially, ARR increased 6% over Q3. Perhaps even more noteworthy, after experiencing headwinds in the first 3 quarters, our net new ARR growth in Q4 was back to prior year levels. This aligns with the remarks and the confidence we shared on our last earnings call that growth would reaccelerate in FY '26. Geographically, the Americas represented 53% of total ARR, while EMEA represented 35% and Asia Pacific represented 12%.

In terms of growth rates by geography, the Americas grew 19% with our U.S. state and local government and Latin America teams leading the way. EMEA grew 24% and Asia Pacific increased 23%. Higher growth solutions like Pathfinder, Guardian and now Corellium have become a larger percentage of our ARR mix. At the end of 2025, these solutions represented 14% of total ARR, and we anticipate that this mix will continue to shift closer to 20% by the end of the coming year.

Turning to revenue. In our Q4, revenue grew 18% to $128.8 million, which includes approximately $1 million from the Corellium acquisition. For the full year, revenue grew 19% to $475.7 million. Our software solutions drove approximately 90% of our fourth quarter and full year total revenue.

Our fourth quarter gross profit increased to $110.8 million, which represents a gross margin of 86%. Our full year gross margin was 85%.

Fourth quarter adjusted EBITDA of $38.3 million, increased 33% over the prior year, and the margin expanded by 340 basis points to 29.8%. For the full year, we generated adjusted EBITDA of $127.6 million or 26.8% on a margin basis. We achieved this level of profitability despite a strong FX headwind as the shekel strengthened materially against the U.S. dollar.

As Tom noted, we have continued to balance the investments required to drive innovation and fuel expansion with our focus on giving our teams the AI-enabled tools to elevate productivity and efficiency. We ended 2025 with 1,285 employees, up 10% over 2024.

Turning to the balance sheet. We ended 2025 with $535 million in cash, cash equivalents and investments, up $52 million despite the outflow of $147 million in net cash used to acquire Corellium in December.

Free cash flow for the fourth quarter was $82.3 million. For the full year, free cash flow was $160 million or 34% on a margin basis. This represents 30% growth over 2024 free cash flow of $124 million or a 31% margin.

As a reminder, we remain very focused on reaccelerating ARR growth while maintaining a free cash flow margin of at least 30%. As a vertical software company, we believe we will be a beneficiary of AI. We are of the view that a strong ARR growth, combined with a strong free cash flow margin strikes the right balance and enables us to serve all stakeholders.

Let's shift gears and take a look at our 2026 expectations. Before I review our guidance, I wanted to share a few thoughts around our guidance philosophy in response to investor questions on this topic. While we were very deliberate about not changing Cellebrite's guidance framework when I joined the company midway through 2025, we have modified our guidance philosophy for 2026. In particular, we focused on setting prudent ARR and revenue expectations around tighter ranges that are corroborated by our renewals, deal pipeline and applicable RPO coverage. Accordingly, we'll use tighter ranges for our quarterly and annual ARR and revenue targets.

As we execute over the coming quarters, we'll reassess and revise those top line targets as appropriate, and the same is true for adjusted EBITDA. Our initial view into 2026 ARR calls for a reacceleration in our growth rate versus the 17% organic expansion we delivered in 2025.

I'd like to quickly revisit the framework from November on the 2026 drivers. First, winning new logos and increasing price or mix on existing offerings is expected to generate several percentage points of growth. Second, Inseyets through conversions, more pervasive deployments and upsells on unlocks is anticipated to support growth in a meaningful way. Our third growth driver involves Guardian and Pathfinder, the cornerstones of our digital investigation and analytics offerings. We expect this will contribute mid-single-digit percentage points to our ARR growth. Corellium, our fourth driver, continues to experience healthy customer interest and demand. While it is still early days, we expect a contribution of at least a couple of percentage points to growth. And finally, we expect to improve gross retention.

In terms of our planned acquisition of SCG Canada, we have not yet incorporated any contribution into our outlook since the deal has not yet closed. It is worth noting that while SCG is currently a small business, it will bring innovative technology that we believe is highly complementary to our platform and will benefit greatly from our global distribution.

Looking at the first quarter, we expect ARR growth in the range of $491 million to $493 million or 20% to 21% growth. The combination of our recent Q4 ARR and our anticipated Q1 ARR demonstrate not only sequential stability, but an expansion motion in terms of absolute dollars versus the comparable quarters 1 year ago. We expect first quarter revenue in the range of $127 million to $129 million, an increase of 18% to 20% and adjusted EBITDA in the range of $26 million to $28 million, with a margin of 21% to 22%.

For full fiscal year 2026, we expect ARR in the range of $567 million to $573 million or 18% to 19% growth, revenue in the range of $565 million to $571 million or growth in the range of 19% to 20% and adjusted EBITDA in the range of $149 million to $155 million with a margin of 26% to 27%.

As Tom noted, we are in the early stages of evolving our products and packaging in ways that are intended to ultimately make it easier for customers to expand the range of solutions they subscribe to over a multiyear period as they take advantage of our cloud and AI-enabled offerings. While we anticipate this will serve as a stronger foundation for durable ARR growth, we also expect that a byproduct of this transition will be more ratable revenue recognition over time. As a result, we continue to view ARR as the most relevant top line KPI.

As you consider our outlook for profitability, I'd like to highlight a few elements. We anticipate, in line with prior fiscal years, approximately 60% of our adjusted EBITDA dollars will be generated during the second half of the year, which will be accompanied by stronger adjusted EBITDA margins.

Our profitability also reflects 2 transitory headwinds that weigh on margins. The first item reflects the absorption of incremental Corellium costs we've added following the acquisition. We expect this impact will dissipate by the end of this year as top line expands. The other factor is foreign exchange, most notably the continued strengthening of the shekel against the U.S. dollar. We continue to thoughtfully manage our overall cost structure while also taking pragmatic steps to limit the impact of FX volatility.

In terms of free cash flow, we're expecting 2026 to be another strong year with anticipated FCF margins in excess of 30%.

And finally, I'd like to offer a thought on Cellebrite's Rule of X performance. Historically, we have calculated our Rule of X by adding our ARR growth rate and our adjusted EBITDA margin. As we have scaled our business and matured our execution, we have delivered adjusted EBITDA margins at levels well above the original floor of 20%. Accordingly, we now view 25% adjusted EBITDA as our new floor on profitability, which also correlates at a high level with a free cash flow margin of at least 30%.

Since more ratable revenue will impact both top line and bottom line rates of expansion, we will be using ARR growth and FCF margin to measure our Rule of X. We feel this will provide investors with more clarity and insight.

Building on Tom's comments around Rule of X, we begin the year with an outlook in the upper 40s and an objective to drive performance to 50-plus.

Overall, the team delivered a successful 2025 despite the transitory headwinds in the U.S. federal market. We are moving into 2026 with optimism around our prospects to further reaccelerate ARR growth while delivering attractive profitability and free cash flow. We look forward to sharing our progress in 2026 with you as we execute on our plans over the coming quarters.

Operator, that concludes our prepared remarks. We are ready for Q&A.

[Operator Instructions] Our first question is coming from Bhavin Shah with Deutsche Bank.

Congrats on a solid year and a strong '26 guide. Maybe first on the acquisitions. I mean you kind of announced SCG Canada, you're expecting to close kind of 2 deals in quick succession. How are you guys thinking about ensuring that you can execute against the strategy for both of these deals along with maintaining a focus on the core? Do you feel like you have to make any internal changes as you pull these companies in? And how do you guys think about allocating resources amongst the core relative to Corellium and SCG?

This is Tom. I'll take it. So first, the Corellium transaction took longer to close than we anticipated. The good news with that is we've now had essentially 7-plus months since we announced the deal to get into a rhythm and a cadence, we inked the reseller deal quickly after announcement, given some of the delays. And so from a training, go-to-market, there were limitations, obviously, that you have where you can't fully operate as one entity pre-close. But while it may feel concurrent given that, that closed early December, and we expect to close SCG by the end of this quarter, realistically or from a sort of an executional challenge perspective, there was pretty good spacing between the 2.

And then the second thing that -- and I'll probably anticipate the question that somebody is going to ask is, how big is the breadbasket with the SCG deal. They're currently -- we're super excited about it because the drone world is, as I said, is exploding and having market-leading drone forensic capability is hugely compelling. And so we think the growth trajectory of that business is also going to be, I'll just say, and I hate to use exaggerated terminology, but breathtaking, I think, description. But for our stakeholders, it's currently a small operation. So they're the market leader in our view, but we're talking about a business that's low single-digit millions. And so the complexity of that business -- and by the way, this is what we do. So instead of using our devices on UFEDs to extract forensic data from phones, we're now using their CFID to extract forensics from a drone. And so this couldn't be more sort of core and complementary to who we are and what we do. So the dive difficulty here is actually relative to a standard acquisition, the dive difficulty here is low.

That's super helpful there. And just a quick follow-up, just on the last point, you're talking about the drone opportunity. Understanding it's still very nascent here, but like how did this kind of come about in terms of looking at the asset? Was this something that customers were asking for? Or is this something that, look, as you look 2 to 3 years, 5 years down the pipe, like this is something that's going to be more meaningful, like what drove it? And how budgets are coming from as well?

Yes. So good news is the answer is both. So in particular, in the short run, and Marcus might comment on this, but in the defense and intelligence world, they're already -- a, they're already using the technology. And as they look to their plans and procurement and the need to expand given the proliferation of drones, the demand from our mutual customers is loud and clear.

And then as we do strategic planning, one of the things you would expect from us is to always look out kind of skate to where the puck is going from a TAM perspective and say, what are adjacent markets that bring big TAM to the Cellebrite value proposition.

And the moves we're making in the whole investigative world and analytics, now combined with the moves we're starting to make in drones, the TAM of those 2 added markets is actually about 5x the core TAM that we've been chasing for the last 19 years. So both from a strategic planning and customer demand, it was sort of one of those -- it's one of the most obvious strategic moves I've seen in my 43 years.

I'll add -- sorry, I'll just add to Tom's comment there as well. But yes, there is customer demand where we're deploying, we frankly take data from sensors, the biggest sensor out there is a cell phone, but a drone in full deployed in borders and those areas is one of the other sensors, which is definitely required. So yes, there is already demand and there's already trading for those solutions.

Our next question comes from Jonathan Ho with William Blair.

Let me echo my congratulations as well. I wanted to start out with maybe a little bit more color on the investments that you made to extend your mobile forensics leadership that we'll see later on this quarter. Could you maybe help us understand what this could mean from either improving net retention, win rates or product expansion perspective?

Yes. So Jonathan, the investments were basically doubling down with our internal research team to both extend our leadership in Android and to also ensure that -- look, we'd love for people to just standardize on us for the front-end unlock and access from a platform perspective, but we don't want them to feel like they're making any sacrifice.

So the goal is to have a leadership offering in both of the major OSs, both Android and iOS. And so the investments were made in our internal research team to make that happen in conjunction with several external partnerships, which, by the way, is not new. It's sort of a standard operating procedure for us for the last 15-plus years to leverage the combination of our internal badged researchers with some of the best and brightest researchers in the world to help complement our capabilities.

And so we've doubled down on one of those partnerships, and we've added another one that helps bring new attack vectors for exploits and vulnerabilities. And when you roll those partnerships together with the innovation, that's why we feel so optimistic about us having a very clear leadership position across the board. And if that comes to fruition, given the importance of access, it will clearly drive accelerated growth on the front end of our Unlock Access and our Inseyets penetration and market share and year-to-year growth.

Got it. And then just in terms of your comments around the U.S. federal government spending environment, where are you seeing maybe the most pent-up demand? Where are you seeing sort of improvement in terms of sort of the malaise that we saw last year? And what sort of gives you the confidence that this can sort of return to a stronger growth rate?

Yes. I covered like the macro categories, but I'll let Marcus because he's really dialed in and close to this. He can give you maybe a better answer, but I think you'll hear there's sort of empirical data and meat behind our enthusiasm. But Marcus, why don't you take a shot at that question?

Yes. It's kind of a do say, as we said, over the last 6 months. So what we're seeing is reminding everybody of the use cases which are used. There's obviously the defense and intelligence use cases, which the world continues to get stranger and stranger and more threat. So in full deployment areas where data collection in the new kind of war situation is incredibly important. We're seeing those use cases build out and a lot of confidence build around those, not only on a federal level, but also on a global national level, and you saw that strength in our EMEA results as well.

Border security continues to be across the world a big area and a lot of money is going into that. And then there's also some external things. There's a big World Cup, FIFA World Cup coming to the U.S. That's going to be potential for a lot of serious crime and that has to be prevented as much as possible, and we are used in the deployment of those areas.

So that's the confidence that we see.

The agencies remember under the Big Beautiful Bill were given a 2-year budget, so they're able to get ahead now and start thinking and plan more strategically. And our competitiveness with our product means that we feel comfortable in those positions. So it's the same story of those hardening use cases with more stability from that. And then the final point, as Tom mentioned in the opening remarks, will be the ATO, the authority to operate for our Guardian solution, which means we are unique in a position of the only people that can actually store and share forensic data under the FedRAMP approval, and that opens up multiple petabytes of opportunity for us to capitalize once we get through the ATO process in the next few weeks.

Our next question comes from Shaul Eyal with TD Cowen.

Congrats on solid 2025 completion. Tom, maybe just for clarification, I've been getting some e-mails from investors. On that small drone tuck-in acquisition, the scope, the low single-digit millions, I think you've indicated, is that the price paid? Or is that potential ARR contribution, I don't know, like first half or maybe even first quarter once we close it. And maybe any head count number you can provide us with as it relates to this acquisition? And I have a follow-up.

Yes. Yes. Okay. Good question. So let me be clear and helpful. So we're inheriting a low single-digit ARR run rate. It's a small scale, although market-leading solution. Price paid, we haven't closed yet. So there's a couple of conditions that we're chasing down here in the next week or 2, but we'll be in the $15 million to $20 million range for the company.

And then we'll be disappointed in the midterm if the ARR growth potential for that business isn't well north of that $15 million to $20 million. So this -- we're hitting this at the right time, which part of what -- we moved fast here, and we think asserting ourselves as a first mover at scale to address drone forensics is going to pay big dividends for the company.

No question about it. Makes a lot of sense. Maybe with respect to the model, how should we be thinking about second half versus first half linearity? Should we be -- should it mostly resemble 2025 trends? Or should there be any maybe kind of little deviations as we think about second half versus first half?

Great question. Thank you for asking it. I would actually model the -- from a top line perspective, model it pretty close to '24 in terms of that split, which was largely a little less than 40% in the first half and 60% in the second half. And that kind of maps to what I think Tom highlighted in his remarks around the number of offers that are coming to market.

Our next question comes from Jeff Van Rhee with Craig-Hallum.

Congrats on that free cash flow margin, in particular. Tom, on the AI side, just spend a second and talk a bit more about these opportunities. Specifically, you talked about agentic applications, cybercrime, child exploitation, et cetera. Just talk a bit more about exactly what those would be and how you monetize them, if you would.

Yes. So we're parallel track kind of tracking our efforts in AI. So there's a lot of work being done by the core product and technology team to integrate advanced AI capabilities that drive productivity. So think things like media classification and summarizing text chats and report generation and identifying conflicts and testimony and just a list of things that turbocharge our current stack and deliver a lot of productivity to our users. And we're going to continue to elevate and identify more opportunities to do that real time.

In parallel, we have an innovation -- an AI innovation center that's been missioned with developing more specific agentic applications and use cases that, based on feedback from design partners and some sort of early evaluators, I guess, are getting -- we're kind of pleasantly shocked at people's enthusiasm to begin to deploy these agentic apps.

And I gave you some examples, and I won't name the departments, but in talking to the chief of the investigative unit in the U.S., the large U.S. police department, his response was, so wait a minute, I can deploy this app and just turn the engine loose on a stack of missing children cold cases and see what this application can surface that might provide added insights that we had overlooked and then merit or make it worth the time of a detective to circle back and pursue the investigation. So in terms of your question, Jeff, about monetizing, the candid answer is we are working on that real time, like as we speak to figure out -- and I think a lot of software companies are sort of wrestling with what do you sort of bundle as an enhancement and a value add to the product's core capability, which we're doing with Guardian Investigate.

And then what are the things that you can monetize and then what are the price points. But one of the messages I would give to the shareholder base is candidly, the guidance that we have in place today assumes -- the assumption in the guidance assumes that we don't monetize any of that in '26. And based on the feedback we're getting, I actually think there is going to be an opportunity in fiscal calendar '26 to start to monetize some of these agentic applications.

Yes. Great. Fantastic. A couple maybe for Marcus. Just Marcus, it looks like I think maybe Tom called out in the script, spending or adding 20% more capacity in terms of sales heads. Talk about just where you're allocating those heads? Like how are you thinking about the assignment and where you're pointing those folks? And then in particular, if you comment on D&I, obviously, with SCG and Corellium, you seem to have a deeper toehold and TAM opportunity in D&I. Does that require a different motion, different touch points? And is that an area of particular focus?

Indeed, yes, let me break that down. So we'll start with public safety, which is the largest part of the business, as you know, there's still scope to add heads there. We feel that we -- our coverage even in SLG in the U.S. can increase. And so we've increased some penetration, especially into the medium and small agencies across the U.S. So that's one area where we've put a well-trodden motion, and we repeat and extend on that.

The next area, which is probably getting missed is through the Corellium play, we have a Viper, which is a pen-testing solution, which is proving very, very interesting and successful with the enterprise. So we've increased our coverage in the enterprise business for our mobile app penetration testing.

Actually, financial services is one of the largest customers we have. A lot of you guys on the banks there run multiple apps, and they need to be checked that they're safe and kind of be penetrated, and that's been a real uptick for us. So we've increased our coverage on the specialization there.

And then the third area is D&I, and we're delighted that we brought back one of our leading salespeople who left us for a little break and has come back to head up a global development there. He's an ex special forces person and is driving a new global standard for us around the D&I space, and we've added resources both in Europe and the U.S. to cover that.

Wow. Maybe just one last for me then, Marcus. On the FedRAMP, is that -- is there a backlog sitting there that had been kind of waiting for this? And should you see a surge from that? And then maybe to put a finer point on it, I think in the prior call, you or Tom, I believe, had mentioned a very large deal. I believe you said the largest deal that you've ever seen. That was looking like it was lined up for an H1 '26 close. If I have that right, can you give any update on that?

Yes. So let me tackle the second part of the question first. So we have multiple threads of large annual spend in the first and second half of this year. So we feel confident about our position trending there. But I'd like you to think about that. There's not one single customer. There's actually 3 or 4 different programs, which are all in 7 figures for us. So we continue to track well, and we feel good about our technical evaluation position. in multiple threads there. The second point is, could you actually ask the first question again? Sorry, I lost my thread there.

I think we were talking about the federal side. I was most interested in the big deal that you had talked about.

Yes. The big deal continues to track well. So we feel good about that. These big deals tend to scale up and grow. Procurement can be complicated, but we feel good. But I want you to think that there's not one. There's multiple agencies, both in state and local and in federal, which have multiple big deal opportunities for us. So we continue to track well against the one we highlighted, but we're actually adding fire to the -- fuel to the fire on that.

And then the first part, sorry, was ATOs come back to me now. Yes, look, I mean, when you say backlog, I've got to be careful because the backlog would suggest that we have a purchase order. What we do have is we've seen our largest bid go out. We have scoped an initial contract for a large federal agency in their storage requirements, which exceeds 9 petabytes. And that would equate to a very large deal that would be certainly the single biggest transaction we would have ever done. And we continue to track well. We want to get through the ATO process, which we're confident on, and then we will talk about turning that into real revenue as quickly as we possibly can.

Our next question is coming from Mike Cikos with Needham.

I'll echo on the congratulations on the strong finish to the year. I wanted to come back to the Inseyets conversions and the unlocks for a second. Can you help us think about how the adoption of unlocks trended in Q4?

And Dave, I know you went through a number of different vectors that give you guys confidence in that ARR reacceleration in the coming year. But what are your assumptions as far as how Inseyets and unlocks play into that? I just want to make sure I was clear on that. And then I have a follow-up.

Okay. Mike, let me kind of break them apart between the Inseyets and the unlock because I think there are a lot of different dimensions. I think we ended with Inseyets at are about 55% Overall, I think we feel good. I think that will follow our deal -- overall broader deal seasonality just from the standpoint that the transitions will probably occur with deal contract expirations. And so probably follows that linearity or the seasonality I described earlier around how things unfolded over the course of fiscal year '24.

The unlocks will be a little bit different just from the standpoint that as Tom alluded to, there is work and new technology that will be hitting the market. And so that really will start to kick in, in, I'll call it, late Q1, but really Q2, and then I think it builds and it ramps from there. Now some of it will be linked to expiring agreements. Some of it will be expansions of existing deals. And that's a little why we kind of called out in his remarks. We want to see how the market reacts to give you a little bit more color around how it unfolds.

So we have a, I guess -- Mike, I have a thesis, but I need a little bit more data, and that was kind of incorporated in the guidance.

Understood. Okay. And then for the follow-up here, just wanted to get a better understanding. I'm happy that we have Corellium in the rearview as far as the closing in December and then the expectations for a couple of percentage points growth in the coming year.

Can you just help us think about the cost base that Cellebrite is now carrying for that asset and how that impacts the calendar '26 guide? I know you cited specifically Corellium as well as the headwind from an expense perspective tied to FX. But just wanted to make sure I was thinking through that properly.

Yes. So let me maybe just kind of tether with some numbers. I mean it's about 1 point of compression on margins due to Corellium. And I think as we shared in the remarks, we'll grow into it over the course of the year. So it's a little bit heavier in the first couple of quarters. We'll get some leverage in the second half. And as we go into '27, we'll be cooking well. And so we kind of picked up a wonderful, wonderful technical team, and they're just -- we're really excited with what they're already doing. And then FX is a healthy -- it's more than a point that's ultimately burdening the P&L. We ended the year with a pretty healthy hedge. But nonetheless, we're taking on a healthy point of compression just due to the strength of the shekel.

So about 2 points of extra headwind than what we expected, and I think it ends up being a temporary headwind in the sense that I think it actually passes through the P&L this year, and we kind of come out the other side with better profitability. And again, I think cash flow margins continue to remain at a pretty compelling place. Does that help, Mike?

Our next question comes from Brian Essex with JPMorgan.

Congrats on the results. Great to see the stabilization, particularly in the Fed. Maybe, Dave, if I could maybe have you unpack a little bit of the commentary you had on the guidance, particularly with regard to the prudence of guidance and the tighter ranges around ARR for your targets. Could you maybe help us understand the philosophy that the company had over the past few years and maybe how that's changed, how it's tighter? Is it -- where are you narrowing the guardrails? Is it around upside to give yourself more cushion? Or maybe just help us understand the level of conservatism in the setup as we kind of head into fiscal '26.

Okay. It's a great question. Thank you. I think if you were to rewind the clock and compare where we are today versus where we were, I think we had a $15 million spread on ARR last year. Right now, we're calling $6 million spread. And I think what you probably, Brian, you've seen is I think there's a pretty healthy degree of forecast accuracy.

And so as we've rolled through and quite frankly, as you know, the business, it has a strong customer base motion, and it's complemented by a smaller new logo motion just given how the initial lands happen.

So we really used our customer base motion to really inform it. And so we actually looked at the pattern of our expirations, looked at the upsell. This is where we went from the expirations to the expansion at the time of renewal, and that's what we started to model in. And then we built in some of those points that Tom talked about, but where we had a little bit less visibility, that's where we snapped the chalk line. And so that's how we kind of ultimately got to a $6 million spread looking at the '18 to '19 and then we pulled it through the P&L.

So maybe that variability was previously included in the guide, maybe you're pulling that back a little bit?

Correct. I mean in general, I kind of look out and as I look at it, I try to go for a high degree of visibility. And then as I get a little bit smarter, ultimately, that's what I incorporate. And so helpful little bit as you kind of look in.

Yes, sorry. And then maybe just a follow-up on your comment around gross retention. The comment that you expect to improve gross retention, where have you seen maybe the points of improvements? And how does that like translate into what you have for expectations into fiscal '26?

Yes, it's a great question. I guess I'd start to see it almost beginning with our -- kind of our flagship for our platform in the form of Inseyets and unlock. And so I think there are signs that that's going to get better. I think quite frankly, with the maturity of where we're at, both on Pathfinder and Guardian, I think we see the signs whereas we have customers really operating on very current versions of Pathfinder and expanding on those versions and then certainly, quite frankly, just the build-out on the Guardian platform. So there's a number of compelling features.

And then as Tom alluded to, the customers that are starting to experiment, these are our design customers using AI that naturally ties into both Guardian and Pathfinder. And so they will get, quite frankly, pronounced impact from the adoption of AI. And the fact that they're uploading more and more data and using it that way, I think, gives us increased conviction.

Our next question comes from Eric Martinuzzi with Lake Street.

Tom, I wanted to dive a layer deeper on your comments regarding AI. Curious to know in your conversations with customers, obviously, there's tools that they use outside of your C2C platform. Are they pulling you in a direction as far as where they want you to see enhancements made in the platform? Or is it just, hey, we've got AI within the C2C platform and people aren't straying from that?

I'm not -- can you try that again? I'm not sure -- ask again to make sure I answer that.

Yes. There are kind of open market tools for generative AI outside of the C2C platform. Just curious if customers are pulling you in a direction where they want to see investments made in your platform, tools they're using that aren't...

Yes. The good news is everybody is tinkering. And what the early tinkerers are discovering, especially as they start to see and hear about what we're doing, candidly, they're seeing a huge gap in what we're able to produce in terms of the depth, the quality of the kind of the AI output and which makes sense for the reasons I shared earlier, given our knowledge and access to the complex and critical phone data.

And so instead of them saying -- the honest answer right now is, instead of them saying, hey, can you kind of shift course 10 degrees here because this is what would help me or this is where I'm going, as they're learning and discovering what we're doing, actually, what they're saying is, I'm going to stop and I'm going to adopt the products and the capabilities that you're bringing to market.

Understand. And then is that -- as you look at the pipeline, and this is kind of product development pipeline, you talked about forensic investment as a key area. How are you using AI in that forensic investment part of the R&D?

Are we using...

Oh, sorry, you want to maintain the AI in the forensics -- Right, specifically in the forensics part of the product.

Yes. So if your question is, are we leveraging AI to extend or maintain the forensic capability? Is that the question?

Yes.

To be honest, what we're leveraging more right now from a technology perspective is the Corellium asset. So that's been a tool for us for the past 5 years, and now we own it. So we use that to accelerate the identification of vulnerabilities and exploits.

If the question is, is there a magic AI engine that can go surface vulnerabilities? Maybe that will happen in 3 years or 5 years, but we don't see that right now.

Yes. And just obviously, all software stocks and yours in particular, seem to have gotten hit here in the past few weeks. And with that assumption in mind, it just -- it's a head scratcher for me. I'm sure it is for you guys as well, but just to ask the question.

Yes. No, it's -- I think what we would say generally is, given the nuance of what we do, the specific use cases, the workflows, the complexity of the data on phones, this is not some standard research or task that a lot of these engines are capable of essentially outsourcing and driving.

And so this is why we think AI for Cellebrite and probably a handful of other companies in very specific nuanced industries, this is actually a tailwind and a force multiplier for us that we're going to harness and both deliver value to our shareholders, but also deliver more value and speed and insight to our customers. We scratch our heads on the whole AI is going to make software go away. We have kind of the complete opposite view.

Operator, any other questions?

This does conclude the Q&A portion of today's call. I would now like to turn the floor over to Andrew Kramer for additional or closing remarks.

Thank you, operator, and I'd like to thank everybody for joining us this morning. If you do have any questions, please feel free to follow up with Investor Relations, and we look forward to speaking with our shareholders and prospective shareholders over the coming days and weeks. Thank you.

Thank you. This concludes today's Cellebrite Fourth Quarter and Full Year 2025 Financial Results Conference Call. Please disconnect your line at this time, and have a wonderful day.

Guys, thank you for joining today. My name is Steve Pettigrew. I lead the Software Investment Banking business at UBS. Pleased to have with me today David Barter, Chief Financial Officer; and Tom Hogan, Chief Executive Officer of Cellebrite. For those of you who don't know Cellebrite, digital investigations market leader, and we'll talk through a little bit more about what that means today. Tom, maybe you can start us off. Can you share for kind of people who aren't as familiar, a little bit of background about Cellebrite and your history?

Yes. So the company, roughly 20 years old, obviously, public, NASDAQ listed. The genesis of the company is in Israel, where the core of our research and development still sits today, but we have a huge presence around the world, operate very internationally, do 55% or so of our business in the United States and 45% in the rest of the world. And what we do, we're a force for good for all of you. Whoever is here, whoever is listening, we help both exonerate innocent people, but in most cases, we help put bad people behind bars.

And that ranges from terrorists to murderers, to pedophiles, to human traffickers, to fentanyl rings. We're the technology engine that works closely with municipalities and police forces and democratized nations around the world with -- we help private enterprise, and we also work closely with virtually every intelligence agency and defense departments in countries that have high standards for human rights and privacy. So we make the world a better, safer place. And if you like a mission-driven story, this is about as good as it gets.

Well, perfect. I know you joined us here last year, and I think you -- your role has transitioned a little bit since you've taken over as permanent CEO. I think last year, when you were here, you had shared with a lot of investors that you had your own journey and that you had beaten cancer. So quite a kind of quite an evolution. But can you share a little bit with everyone here about why you decided to take on this role and why you're excited to join Cellebrite?

Yes. So I joined 2.5 years ago as the Exec Chair and decided that my operating days were behind me but wanted to be more engaged than just the sort of the traditional Nonexec Chair or Director, the drive by shooting approach of going to quarterly Board meetings. I wanted to be more engaged.

And so that's what led me to join as Exec Chair in the summer of '23. And then life threw me a curveball that I won't dwell on. Out of the blue got diagnosed with Stage IV cancer 18 months ago, went through 6 months of intense chemotherapy at MD Anderson in Houston.

So if anybody in your network of friends or family has cancer, can't say enough good things about Anderson, they cured me. And at the end of '24, the current CEO who reported to me in my Exec Chair role, who've been at the company for 19 years, decided it was time for him to move on. Then the Board asked me to step in, and I was literally just finishing my treatments and said, I'll step in as interim, but until I get 100% of my health back, consider me interim. And then fast forward 6 months, I had clean scans, my strength, my immune system, everything was all systems go.

And the Board said, now will you do it? And my answer was yes. And to your question, why, it really is -- it's 2 things. It's 80% the mission. And when you see a company that's helping either rescue a 12-year-old girl that was kidnapped and is enslaved in a sex trafficking ring.

And these are hard things to say publicly, but some 12-year-old girl who's being forced to have sex with 10 strangers a day and all she wants to do is get home to her family and her mother and you help make that happen, not a lot of things in life that are more rewarding than that or a guy who shoots his wife and 3 children and cooks up some excuse or story or alibi and you use the digital evidence to convict and put that person behind bars.

I've never experienced anything like that in my career, and it's so important to making the world a better, safer place. And then the other piece of it, which is the 10% is I looked at this company and said, wait a minute, this is the global leader in this and crime is not going away. And the use of technology is going up, and the sophistication of using technology is going up in an equal trajectory.

And if we do our jobs, there's a huge economic opportunity here for the stakeholders in the company to grow and build enterprise value while you're making the world a safer place. And when you put that cocktail together, that was enough for me to say you raised both hands and say, I'm in. So that's what triggered the transition from interim in the summer to full time.

Perfect. Maybe we can jump to a bit of kind of topic old news that you just announced earlier today about the closing of Corellium. Can you share a little bit of background first about the acquisition and why you're excited about having this technology on board?

Yes. So we've been a customer of Corelliums for, I think, over 5 years. And I won't get -- it's kind of techno jargon, so I won't get into the detail of it. But what they do is they're able to virtualize any device that's Arm-based. And if you're not into chip architectures and technology, Arm is at the core of almost everything you touch and deal with every day, whether it's an Apple phone, an Android iOS phone, obviously, laptops, IoT sensors, drones, it's ARM-based.

And what Corellium does is they have a very unique, completely unique ability to emulate and virtualize any Arm-based device. And so we used it to help us identify vulnerabilities to provide our access and unlock capability. But that was just a portion of their business. They provide very rich DevSecOps and pen testing capabilities that apply to both the private sector and in the public sector and within the public sector, specifically in the defense and intelligence arena.

And so we sort of -- when they decided, hey, if we want to be all we can be, we need to be in a bigger channel. We're a company of 70 people with some of the most powerful technology in the world that's used by every 3-letter agency you know in the U.S.

But we can do so much more in the hands of a bigger company, yet a company that shares our passion for public safety and agility and innovation. And so when they ran a process, we jumped on it. We announced the deal in June. It took us until this week to get to clear CFIUS because we're viewed as it's a foreign-owned asset of IP that's mission-critical to people like the CIA.

So it was a rigorous process that Dave and our General Counsel helped navigate. Good news is we got the thumbs up this week. We closed last night, was announced this morning, and we're hugely excited about the TAM and the growth layer that this will inject in the Cellebrite story as we look toward 2026.

Well, congrats and that's a nice expansion of the platform. I think a lot of people know you as the leader in digital forensics. I know you have bigger ambitions. Can you share a little bit of detail about where you want to take the company over time? And will steps like Corellium more strategic acquisitions be a part of that journey?

Yes. So 2 questions and if I lose track, bring me back to the second question, which is how do we think about M&A. But the current big play for us is the company was born, call it, 20 years ago. And we clear -- we became the clear leader from a forensics perspective, meaning somebody just shot their wife or somebody was just busted dealing fentanyl in a neighborhood.

And the person is arrested in charge and they say, "Hey, Bob, give us your phone," and Bob gives the police their phone. And then they say, Bob, give us your password. And Bob says, "I'm not giving you my password" because as you know, your life is captured in that phone, and there's a lot of damning evidence that they know will surface.

And that was the genesis of the company. We established a clear leadership position. We're deployed in roughly 85-plus percent of law enforcement agencies and intelligence agencies around the world. The big play for us now is, okay, you've got all this forensic data, great.

That's really hard, so kudos. But now let's extend the value proposition to then help the detectives, the investigators and the prosecutors leverage and take that forensic information and drive it all the way through closure of that case, which, in some cases, to be clear, could exonerate somebody and say, actually, no, we thought it was Bob, but it was actually Ted.

And based on the data we found, but let's help that world. And by the way, the thing that's exciting from a TAM perspective and growth opportunity for Cellebrite is the number of detectives and investigators and prosecutors as an orders of magnitude more than the number of examiners in a forensic lab.

So the big push for us now is to extend our leadership from the classic forensic world into the investigative world to help leverage that data and bring cases to closure. So that's sort of the big strategic thrust. Your other question is sort of, I think, was sort of how do you think about M&A? And you just closed the deal last night. Is there more coming?

And I would tell you that in this business, in software, you either grow or you die. There's no such thing as a successful software company that, in my opinion, that's not growing. I don't care what your bottom line margins are. And to grow in this world that we live in today with the advent of things like AI to grow, you've got to innovate constantly.

And so when we think about innovation, we think in 3 paths. One is organic innovation. And we spend more on innovation in this category, we're pretty convinced by a wide margin, anybody else on the planet.

So we spend heavily, and we have people that are really good at this stuff with the genesis or the history of the company from an R&D perspective in Israel. The second piece is partnering, which we have historically not been strong at, that we are doubling down on and making great progress.

So you don't always have to build it and you don't always have to buy it. There are places where partnering is the optimal path. And the third path, to your point, Steve, is M&A. The good news is this company has never been goldfish.com where we raise $1 billion and do Super Bowl ads. We've been pretty disciplined stewards of the P&L and have a -- for our company our size, our balance sheet is sort of the Rock of Gibraltar and our free cash flow, which Dave can talk about, is very healthy, which gives us the firepower to be smart if we don't want to -- typically, the decision between build and buy is not about money, it's about time to market, because we can build almost anything in this space if you give us time, we have the smarts and the people. It's really a speed-to-market issue.

And so we will continue to -- we are active every week in evaluating moves that maybe we could or should make on the acquisition front to complement the things we're doing partnering and to complement what we're doing organically.

Perfect. I know a big focus for investors lately has been the federal budget, the kind of the funding side of things with a lot of the headlines this year. It's been very topical. The last quarterly announcement, you had expressed confidence about the future in a few different ways. I think you had said the flywheel in the U.S. federal has begun to move. You expect a resurgence of growth in calendar 2026 across the federal sector. Can you elaborate on the dynamics you're seeing?

Yes. So we do expect a renewed resurgence of growth in the U.S. By the way, I want to be clear, the federal space, so think defense and intelligence outside of the U.S. has actually performed well. So this was really a specific statement about U.S. federal, given all the -- I'll just call it the change with the new administration, created some headwinds for the U.S. federal business.

So what's changed is -- and it's not DOJ, it's been -- there was a significant amount of change in leadership. And if you follow the news, for the last -- especially the first 6 months of the new administration, every night, it was here's the new leader for the FBI, the new leader for DOJ. So you had a massive change in leadership that was a bigger impact than cost cutting in DOJ.

And so that just caused sort of a freeze. Now our renewal business did not suffer, but the new business that we have enjoyed the last 4 or 5 years in that space, that basically stopped during all the transition of the new administration. And so that has now settled down. And the new leadership is in place.

The administration's priorities are pretty clear. Now you layer in the BBB and a big chunk of the big beautiful bill has been earmarked at initiatives that are right in the crosshairs and sweet spot of this company, whether it be things like fentanyl, border control, the ICE initiatives, you go on the list of just general safety in cities across the country.

And I'm not -- these aren't political statements. This is just a reality of the new administration's focus. We are critical to efficiently prosecuting those agenda items. And so the second thing past stability and leadership is the amount of money that's been earmarked for initiatives that depend on technology that we provide.

And then the last thing that I'd point to is a big part of our new strategy in the investigation world our cloud-based products. And for us to sell the cloud-based technology into the U.S. federal space, we had to get full Level 4 FedRAMP certification and authorization to operate.

We've been at this for 2 years. About 3 months ago, the last mile is to get a sponsor to be your godfather or godmother. And we couldn't have been more pleased to have -- it was actually the Department of Justice, the DOJ said, we support and embrace the strategy. We will be your sponsor. We expect to get that final ATO in the first quarter, which then opens the door for all of the cloud-based products in the federal space to complement the legacy forensics.

Great. We can't have a presentation without talking about AI at this conference. And I know you've invested heavily in AI across the portfolio. Can you talk a little bit about how AI is impacting digital investigations?

Yes. It's -- so I mean, it's so topical for everybody. I would tell you, first, we're doing a lot with AI internally to drive our own productivity. And Dave has been a champion of this as our new CFO and doing a fantastic job. And we've identified in every function initiatives to be more efficient, which helps the P&L.

But then the other piece of it is how do you monetize and elevate the value proposition of our solutions to the external market. And there, I see a sort of a bifurcation of capabilities that we're going to just embed in the core products that improve and elevate the value prop of what we currently ship.

And then there's going to be another thread of more agentic applications. And to give you an example, an agentic app that's targeted at cold cases or an agentic app that's targeted at CSAM and ICAC for those of you don't know, like Internet crimes against children and bad Internet child pornography and things of that nature.

So we think there's a near-term opportunity to build agentic apps that stimulate workflow and drive faster resolution of important either workflow things like warrant returns or specific cases like homicide or Internet crimes against children as an example, that we will monetize.

And so it's a chunk will be things like chat summarization and media classification and the filing of standard reports, we'll leverage AI to make everything we currently sell more powerful. But then we're going to layer on top of that agentic things that we can discretely SKU and monetize that will take productivity to another level and be -- and by the way, I want to be clear, in this world, if you go to a courtroom and you're trying to put somebody away for life or in some cases, the death penalty, the courts have no patience for a sole or pure AI-driven case because you don't want a hallucination to put somebody in an electric chair. So in our world, unlike the corporate world, you really have to have traceability, you have to have the human in the loop to corroborate and link with that AI data, but it can still be a hugely powerful tool because I'll just give you one data point, pick a networked crime.

And when I say network, think drug distribution or human trafficking that might involve 50 people in nations around the world. And you start to crack that ring and collect digital devices and artifacts, you can have, in some cases, 500 million pieces of evidence associated with that ring.

So leveraging an AI engine to find patterns, correlation, affinity analytics to guide steps in the investigation, no human on the planet can process that breadth of information. And so AI is going to be a huge enabler to solving and cracking crime to the point that I believe in 10 years, everything but crime is a passion. People are going to say, why bother? I'm going to get caught.

Dave, I want to give you a chance to get involved here as well. We've been monopolizing the conversation a little bit. Last quarterly call, you talked a little bit about some of the drivers that you expect of future ARR growth. Can you share some of the highlights on what you expect to be driving growth into the future?

Sure. It's a great question. I think last time we called out about 5 drivers. And I think at the bookends, we talked about the continued expansion with new logos, feel very good about how we're going out to market, continuing to add to the portfolio.

At the bottom end of the bookend, we also talked about the ability as we're really starting to sell as a platform, that ability that we're tightening up our gross dollar. In the middle, we really talked about 3 areas of excitement. Certainly, the element around Insights.

This year, we talked about getting up to about 50% of our customer moving to Inseyets. And when that happens, we're seeing really good unit volume growth as people move into Insights. Still very excited about what's happening with Guardian and Pathfinder, where Pathfinder has been growing almost 1.5x the rate of Inseyets. Guardian has been growing about 2.5x the rate of Inseyets when you look in the last quarter.

And then we look at Corellium and really kind of continuing to extend that whole platform motion that we have going on with customers. So we feel like that's a really great scaffold and you'd be looking at the company when you think about durable growth, looking not only at '26, but looking beyond '26 into '27 to '28 to really track the maturation of the company.

And you've been able to grow profitably as well, had a good year in 2025. Where do you think the bottom line can get to over time?

I think that's a great part about the business. I mean we're already running at a 30% free cash flow margin. I think on the call, we highlighted we've been building out the -- our headquarters here in Washington, D.C. and North America. We'll have a little bit of a refresh on our headquarters in Israel. And so we'll have 2 years where we have a little bit of elevated CapEx. And off of that, kind of being in the 30% to 31% free cash flow margin, we think it just naturally continues to climb.

And so if you look back at the business a couple of years ago, we were back at 24% free cash flow. And so I think the business as it's scaled, I think we've thoughtfully found leverage. We've invested, and we'll find more leverage as we continue to prosecute and take advantage of our mission.

Great. And Tom, maybe a couple of quick ones. We don't have too much time left here, but market has been very fragmented historically. How do you think about the competitive landscape?

There are -- there's lots of pieces. I describe it as a puzzle. So you could have a puzzle piece that's ballistic information. You could have a piece that's sound in shot detection. You have fixed camera license plate readers. You have -- the puzzle is -- can be simple and a simple domestic violence case, but in a lot of cases, there's a lot of pieces to the puzzle.

I think if you're the FBI or you're the CIA or you're NYPD, unfortunately, right now, they need to be what I call instead of systems integrators in the classic sense, they have to be evidence integrators.

And my vision is the more we can bring the puzzle pieces into focus for those agencies and then leverage AI so that they don't have to go cobble together bits and bobs of information and evidence. That's what they want.

And so our view is we don't have to have -- we don't have to own it all. But we want to have access to those different data sources so that we can put it in a consolidated place and then run the world's best AI-enabled analytics against it to help make their jobs better.

Perfect. You mentioned on the recent call, you talked about Sun's 40% stake. How do you see Sun's ownership evolving over time?

Well, they started with 100% a long time ago. They're down to the low 40s. We would like -- and I would -- if Sun were sitting here, I'd tell them the same thing. We'd love to see them sell down some more just to diversify the holder base, and we think that will happen.

Part of the problem is they've had a lot of success. They bought the company for $15 million, whatever it was, 18 years ago, and now you know what our market cap is.

So it's been a pretty good deal for them. But we would like them to continue to downsize their position just to enable a broader fresh set of investors. And so we're working collaboratively with them, and we think that will happen with time. And the timing and the degree is TBD, but we think that would be a logical progression.

Okay. And we're more or less out of time, but maybe just to wrap up, what else should investors be on the lookout for over the long term with Cellebrite?

I think in the long term, this is -- if you like to invest in a company that's actually doing really good in the world and a company that's growing at a healthy clip. It's still small in the scheme of things. When you think about our business in the federal space being roughly $75 million and what the U.S. government spends in total, people like, "Oh, what about budgets? Like we're coffee money to every one of these agencies.

So the headroom here is huge. And the last thing is we're pretty good stewards of the business running at a, call it, a Rule of 50 with free cash flow with a 3 handle and a plan to get back to next year a top line with a 2 handle that's doing good in the world. That's a pretty unique combination and a company that we're all proud to be a part of.

Perfect. Thank you both for joining us.

Thank you, Steve. Appreciate it.

Steve, thanks so much.

Welcome to the Cellebrite Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer. Mr. Kramer, the floor is yours.

Thank you so much, operator. Welcome, everybody, to Cellebrite's Third Quarter 2025 Financial Results Call. I'm joined today by Tom Hogan, Cellebrite's CEO; David Barter, Cellebrite's CFO; and Marcus Jewell, our CRO. 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 our prepared remarks.

Please note a copy of today's press release and financial statements, including GAAP to non-GAAP reconciliations, is available on the Investor Relations website at investors.cellebrite.com. In addition to the press release, we posted a separate investor presentation that provides an overview of our business and our recent financial performance. I'd like to also remind everybody that the slides in your webcast viewer is a placeholder only. There are no actual slides to accompany our prepared remarks.

We also published supplemental historical financial information for each quarter of 2025 and for the past 2 years on our Investor Relations website. Additionally, unless stated otherwise, our discussions of the third quarter 2025 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 over the third quarter of 2024.

In addition, I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's business operations and financial performance. All forward-looking statements are subject to risks and uncertainties and other factors that could cause matters expressed or implied by those forward-looking statements not to occur. They could also cause the actual results to differ materially from historical results 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 18, 2025. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.

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

Thanks, Andy, and thanks to all of you for joining us this afternoon. I'll be a bit briefer this quarter than I was last quarter, but I want to start by thanking the many of you that reached out with kindness and support after our last quarter's call. I'm pleased to share that not only do I remain cancer-free, I've resumed my mountaineering passion and climbed a significant peak last month. And the doctors tell me that I should plan to die of a heart attack in my late 80s, which I guess is a good thing but gives me lots of runway to help propel this important company. So let's go.

First, I'm proud of the job the team at Cellebrite delivered in the third quarter. Our results were both solid and balanced. ARR grew 19% for the 12-month period. Subscription revenue grew 21%, led by strong performance in our U.S. state and local segment and our Latin America region. Adjusted EBITDA exceeded expectations growing 20% year-on-year with margin expansion of 60 basis points. We continue to tune our business to optimize top line growth while driving increased scale and operating efficiency to deliver meaningful levels of profitability and a very healthy free cash flow.

Good companies grow. Good companies expand margins. Great companies do both, which is exactly what we did. We were also pleased with our third quarter performance in the U.S. Federal segment. As we foreshadowed in our last call, we do not expect to -- a full return to normalized growth until calendar 2026, but we did deliver year-to-year growth in the quarter, which included the expansion of several marquee clients and confirmation of our view that growth in this sector will resume as budgets are fully distributed. I think it's fair to say the flywheel in U.S. Federal has begun to move.

I want to highlight some important metrics and milestones that contributed to the quarter and positioned Cellebrite for continued growth and leadership. First, we finished Q3 with approximately 47% of our installed digital forensics license base converted to our Inseyets offering. As a refresh for everyone, we set a target at beginning of 2025 of 50% conversions from a 2024 baseline of 20%. Our year-to-date progress clearly positions us to meet or exceed that target; and importantly, it's a strong proxy for the value of the industry's most complete suite of digital forensics.

Second, we continue to see more customers turn to Cellebrite's cloud and SaaS offerings to efficiently and securely manage their digital forensics and investigative workflows. ARR for our SaaS and cloud-based solutions grew 3x faster than total ARR. Guardian is rapidly emerging as the industry standard for the storage and collaboration of sensitive evidential artifacts. The number of Cellebrite customers using Guardian more than doubled year-over-year, while ARR grew triple digits at 100% plus for the fifth consecutive quarter, and this is all before we launch Guardian investigate in the first quarter of next year.

Third, our strategic focus on the global defense and intelligence sector is starting to pay dividends. In the third quarter, we continued to expand our business in the D&I sector as multiple global intelligence and military agencies increased their Cellebrite investment to support high priority use cases across antiterrorism, border control, and overall military responsiveness and readiness. In particular, I'd highlight our D&I expansion in Europe over the past several quarters as an early proof point validating our intensified go-to-market focus.

As we look ahead, we're centered on 4 core growth vectors. First, we're focused on asserting our leadership and breadth in providing unlock and access solutions across the wide range of OEM phone providers and operating systems. Our unlike offerings are now attached to more than 45% of the Inseyets and legacy forensics installed base, reflecting healthy quarterly expansion and sustained demand for this critical capability. Last quarter, we highlighted our clear leadership on Android phones. We extended that leadership this quarter with the addition of industry-first capabilities, and even broader coverage across the Android universe. As we finished 2025, we are equally excited about our leadership opportunity in iOS with pending and added enhancements. We believe the choice will be clear for any customer looking for unlock strength across multiple platforms, combined with industry-leading capabilities for extraction, decryption and decoding.

Second, we are accelerating innovation in AI and digital investigations with the upcoming launch of Guardian Investigate. This new SaaS AI-powered solution is designed to transform the entire investigation life cycle, enabling investigative teams to build stronger case narratives, collaborate seamlessly in a secure, unified workspace and drive AI-enabled insights and analytics and workflow across a diverse set of data sources, including smartphones, computers, call detail records, open source intelligence and case files.

Guardian Investigate will launch in early 2026, and we couldn't be more excited. Guardian Investigate is the logical extension of our 20-year history of leadership and forensics. We are well positioned to power -- empower hundreds of thousands of investigators, detectives, analysts and prosecutors in their mission of prevention, exoneration and prosecution.

Third, we expect a resurgence of growth in calendar 2026 across the U.S. federal sector. After navigating spending headwinds and leadership changes throughout the first half, this segment returned to growth in the third quarter. We remain cautious on the federal fourth quarter given normal government seasonality combined with the shutdown in the past 6 weeks, but we view both as transitory and believe the strategic spending we enjoyed in our third quarter are harbingers of a strong rebound in 2026.

Our conviction in this segment is grounded in 3 areas: first, the release of targeted funding combined with pent-up 2025 demand should elevate investments in our unlock and Inseyets solutions; second, achieving FedRAMP authorization to operate with DOJ sponsorship in early 2026 and should unlock a large opportunity for us to leverage our Guardian offerings across U.S. federal agencies; and third, assuming Corellium is closed by year-end, this asset has tremendous product fit across the U.S. federal space.

Our final growth vector is the pending close of Corellium, which we believe will expand both our TAM and our value proposition, particularly across global defense and intelligence agencies and the private sector. Corellium's Arm-based virtualization software is already enabling some of the world's most sophisticated D&I agencies to harden their cyber defenses by more efficiently and effectively identifying vulnerabilities across a broad range of digital devices. What has us super excited is the consistent surfacing of new and powerful use cases across both the private and the public sector. We're addressing CFIUS requirements real time and expect to complete our purchase of Corellium later this quarter. And as a reminder, our current results and guidance do not contemplate Corellium results or performance.

As we step back and consider the big picture, the macros remain strong. Crime and geopolitical risk is not going away unfortunately. The application and sophistication of technology in the pursuit of crime grows weekly, and budgets for labor to protect public safety remain constrained at best.

The deployment of advanced technologies like Cellebrite remain the best path to make our nations, our communities and our businesses safer. We're focused on sprinting through the tape over the next 6 weeks, but we couldn't be more enthusiastic about 2026 with the confluence of the release of several new value-generating assets between the fourth quarter of this year and the first quarter of 2026. We'll reserve 2026 guidance for our February call and plan to remain prudent when it comes to setting expectations. Nevertheless, our confidence in the reacceleration of our top line growth in 2026 builds every week, along with our commitment to continued stewardship with respect to spending, margins and free cash flow. That ongoing discipline not only delivered a third quarter beat on the bottom line but also triggered a raise on our full year 2025 adjusted EBITDA target. And Dave will talk more about this in just a minute.

Finally, I want to sincerely thank the roughly 1,250 strong Cellebrite operatives, which are our people, and our customers who place huge trust in us every day. It's an honor and a privilege to serve all of you. I was excited about the prospects and the mission of this company when I joined as Executive Chairman in 2023. I can tell you with absolute conviction, I am more enthused about our future today than when I joined 2.5 years ago. I believe the best is yet to come as we continue to innovate internally and tap much further and deeper into the enormous power and potential of AI complemented by disciplined and targeted acquisitions and strategic partnerships. We're confident the combination of strong execution with a growing and mission-critical TAM will drive material value creation for our customers, our employees and our shareholders.

With that, I'll turn it over to Dave.

Thank you, Tom. I'd like to briefly share highlights from the third quarter. ARR grew 19% to $440 million. Sequentially, ARR increased 5%, which is a healthy improvement from our sequential ARR growth rates in Q1 and Q2. The year-over-year increase reflects increased spending by our existing customers. The Americas represented 55% of total ARR, while EMEA represented 33%, and Asia Pacific represented 12%. In terms of growth rates by geography, the Americas grew 21% with our U.S. state and local government and Latin America teams leading the way.

Turning to revenue. We generated third quarter revenue of $126 million, which increased 18% from the prior year due to primarily subscription revenue growth of 21%. Approximately 89% of total revenue was associated with our subscription-based software solutions. Our gross profit increased to $106.5 million, which represents a gross margin of 84.5%. This reflects ongoing investment in our cloud infrastructure as we continue to roll out Guardian and invest in the federal ATO process. Third quarter adjusted EBITDA of $37.7 million increased 20% over the prior year, and the margin expanded to 29.9%. Our third quarter operating leverage reflects thoughtful capital allocation across our organization, including disciplined hiring activity in the quarter. We ended the third quarter with 1,236 employees.

We reported third quarter net income of $36.9 million or $0.14 on a fully diluted basis. Overall, our weighted average diluted shares outstanding increased by a little more than 1% from the second quarter levels. We continue to thoughtfully manage our equity incentive programs in ways that we believe will be minimally dilutive on a go-forward basis.

Turning to the balance sheet. We ended September with $595 million of cash, cash equivalents and investments. Free cash flow for the third quarter was $30 million. For the trailing 12 months, free cash flow was $140 million or 31% on a margin basis compared with $102 million or 27% margin in the prior 12-month period.

Let's shift gears and take a look at our expectations for Q4 and the full year, which, to be clear, do not include any contribution associated with Corellium acquisition, which has not yet closed. We anticipate our fourth quarter ARR will grow sequentially in the mid-single digits. We've left our full year outlook unchanged with a range of $460 million to $475 million. This reflects the traditional seasonality of our business in the second half of any year given the volume of expiring agreements, the overall strength of our pipeline and the uncertain timing of the near-term spending by U.S. federal agencies. We expect fourth quarter revenue in the range of $123 million to $128 million. We expect our Q4 adjusted EBITDA in the range of $35 million to $38 million or approximately 28% to 30% on a margin basis.

Looking to our full year results. We've increased the midpoint of our revenue outlook and now anticipate 2025 revenue in the range of $470 million to $475 million, which represents growth of 17% to 18%. We have increased our full year 2025 adjusted EBITDA range and now expect $124 million to $127 million or approximately 26% to 27% on a margin basis.

And finally, I'd like to reiterate our view that 2025 will be an excellent year for free cash flow. Given the strong cash flow from operations year-to-date and relatively minimal capital intensity, we expect the company's free cash flow margin will be approximately 30%.

Before we move to Q&A, I wanted to share some perspective on our 2026 planning. As Tom noted, we have multiple growth vectors. We are also mindful of the challenges we experienced this year in regard to the timing and magnitude of spending in the U.S. Federal customer segment. Thus, the initial 2026 outlook we will share in February will be prudent with the foundation grounded in the historic seasonality of our business, our RPO, our contractual backlog up for renewal, the expansion opportunity on those renewals and the near-term opportunities to expand with existing customers on multiyear contracts.

We will also apply the same methodology that delivered a high level of forecast accuracy last quarter. It's important to note we have multiple ways to grow free cash flow by approximately 20% with 2% dilution. This will allow us to be very thoughtful in terms of how we set our initial outlook. We are optimistic that we will be able to increase our outlook over the subsequent quarters as our team executes and captures the market opportunity in front of us.

Let's take a quick look at the primary growth drivers across our platform that can serve as a foundation for an initial baseline target for healthy ARR growth. First, winning new logos and increasing price or mix on existing operator is expected to generate several percentage points of growth. Second, we see solid expansion ahead for Inseyets as we move into the home stretch for upgrades, drive broader adoption by extending our reach into new user groups and upsell advanced unlock solutions and automation offerings. We believe these dynamics should support growth of at least high single digits on a percentage basis in 2026.

Our third growth driver involves Guardian and Pathfinder, the cornerstones of our digital investigation and analytics offerings. We anticipate healthy Guardian demand within our existing core markets, expansion into the U.S. federal sector, Australia and other select international markets and sales of Guardian into the enterprise. In addition, we see further new business expansion combined with stronger renewal rate for Pathfinder. Success on these fronts is expected to contribute mid-single-digit percentage points of ARR growth.

In addition, we are excited about the growth prospects for selling Corellium solutions into our customer base across defense, intelligence and enterprise verticals. Beyond the initial ARR gained from Corellium once the transaction closes, we anticipate an incremental contribution of at least a couple of percentage points to our ARR growth rate. And finally, we remain optimistic about the steps we're taking to drive improved retention rates by minimizing churn as we evolve our pricing and packaging centered on AI and cloud capabilities and attractive multiyear terms.

In terms of 2026 revenue growth, we believe our revenue growth rate will slightly trail our ARR growth rate. This reflects the continued growth of our cloud-based solutions and assumptions for relatively flat nonrecurring hardware and professional services revenue. In terms of revenue seasonality, we have historically generated approximately 55% of our revenue in the second half of the year. From a profitability perspective, we plan to thoughtfully allocate capital to support Cellebrite's ongoing expansion in 2026 and beyond.

As a reminder, our EBITDA margin is lower in Q1 and steps up over the course of the year. We also expect our AI investments across go-to-market, product and the G&A functions will lead to new levels of automation and scale and yielding moderate head count expansion. This will produce operating leverage to drive incremental improvement in our adjusted EBITDA margin and enabling us to maintain a 30% or greater free cash flow margin.

In terms of our guidance philosophy going forward, we plan to set our 2026 outlook using tighter ranges supported by bottoms-up forecasting while continually assessing the full year targets based on the most recent quarter's results and near-term visibility. We're excited about our prospects to drive durable and profitable growth and strong free cash flow next year.

Finally, since joining Cellebrite, I've been very fortunate to spend a good deal of time with current and prospective shareholders. A frequent topic in recent engagements relates to the overhang associated with the Sun Corporation, our largest shareholder who owns 40% of the company's shares. I've had an opportunity to spend time with some members of Sun's management as well as some of their investors.

Overall, I view these relationships as very positive. With that said, we are increasingly optimistic about opportunities that could emerge over the coming quarters and years for Sun to reduce its stake in an organized, structured and thoughtful way that we believe will deliver value for shareholders of both Sun and Cellebrite.

I'd like to close by reiterating our view that Cellebrite remains well positioned to deliver another year of healthy growth, strong profitability and excellent free cash flow with a minimal amount of dilution to shareholders. Our team is focused on closing out the year on a strong note while also putting the plans in place that we believe will enable us to expand customer relationships and increase shareholder value in 2026.

Operator, that concludes our prepared remarks. We're ready for Q&A.

[Operator Instructions] Our first question comes from Jeff Van Rhee with Craig-Hallum.

Congrats on a good quarter, and thank you for the color on the outlook. Two or 3 quick ones here if I could. Just, Tom, in terms of the path forward to cloud adoption over time as a percent of ARR, are there any internal goals or any thoughts you can give us on how you see that percentage of ARR that's going to be cloud evolving over the next, say, 2, 3 years?

Jeff, it's Dave. Thanks for the question. Jeff, we're continuing to work with our customers as they make their transition. We actually have customers that are 100% cloud. We have many that are in the hybrid stage, and then we certainly still have some making the transition. Right now, we just have a very proactive bent of working with our customers. Many of our products, as you know, are already in the cloud, and everything new that we're doing is in the cloud. And so from that standpoint, it's just an ongoing partnership as we support them and keep pressing forward with adoption.

Yes. And on Corellium, you called it out as 1 of the 3 or 4 key growth drivers. I know you signed that new reseller relationship. Just any color in terms of what you saw, both things you were able to get across the finish line and maybe more so what's building in the pipeline there?

Yes, sure. It's Marcus. Yes, look, we've got -- we've had some good initial momentum. We now have a significant pipeline, which we built, like an 8-figure pipeline, and that is spread equally across the cohorts that we said, which will be defense, intelligence and into the Global 2000. To date, we have processed 2 orders, and Q4, we expect to transact some more.

Yes, I'd say, Jeff, to underscore color -- this is Tom. I keep reminding people this business was roughly a $15 million ARR, Corellium's core business. And I don't love lots of numbers. Shouldn't be lost on people that the pipe we already see, as Marcus mentioned, is double-digit millions of achievable pipe and so -- and that's before we've even closed the transaction. So again, we just keep building more enthusiasm. And I also referenced, we've uncovered use cases that we didn't necessarily anticipate or plan 9 to 12 months ago when we started this conversation with Corellium, and so the -- and I guess the positive is the -- was there a modest contribution from reseller in the quarter? Yes, but it's -- you could argue it's almost immaterial. So we didn't hit these numbers on the back end of Corellium backdoor reseller stuff. So it was largely a core Cellebrite production, but the active and real sort of TAM and pipeline is very encouraging.

Yes. Got it. And then just lastly, as it relates to the 2026 plan, thanks for the insights on those 4 primary growth drivers. Sort of just looking at the swag of the range you gave there. It sort of looks like roughly 20%-ish ARR. But just curious if you'd be willing to provide any bounce around that or any expanded insights just in terms of what you think about growth prospects for next year.

Yes. I know it's tempting to answer that, Jeff. And we'd love to help you out and throw you a number and a bone and -- but we just -- we really want to reserve that until we close the year and put a bow around the opportunity. But what we are doing, which I think is atypical at this stage, at least historically for us, is we are sort of going public with a level of confidence that you will see an -- whatever the growth is this year, we do have confidence that growth rate will accelerate in 2026. We're just not prepared today to put a number on it. That's what you'll get in February. But growth is going up, and that's against -- by the way, it also gets overlooked. The law of big numbers, the denominator in the baseline has gone up this year. So we're going to accelerate our growth against a bigger baseline, and -- but that's all we really are ready to share at this point.

Our next question comes from Brian Essex with JPMorgan.

Congrats from me as well on the solid results. Maybe to follow up to Jeff's question to start, and then I have a follow-up. On Corellium, Tom, I think you noted that you're addressing CFIUS issues in real time. How significant are those issues? And are there any contingency plans for a case where you might hit a roadblock there in terms of maybe tucking that into the Cellebrite Federal business? Just wondering what that process looks like and what the risk is to close at this point.

Yes. Nothing is 100%, so I can't write a check that I can't cash on that front. But I would tell you, if you put a gun to my head, I'd say it's 98% odds that we'll get this done. And I think that will -- similar odds that we'll get it done this quarter. We're in the final stages. I would say there was more inspection than we anticipated combined with all the chaos and government and the shutdown didn't help some of the case managers and people involved in just coordinating input across DOJ and DOD and all the people that care, was a little bit tougher given what's been happening in the last 6 weeks.

The other positive, if you're a [indiscernible] person is if this stuff wasn't powerful and if it wasn't relevant to these agencies, they wouldn't care so much about making sure the IP was protected. So the bad news is they ran us through the ringer a little bit more than we expected, but it's because this stuff really does matter to agencies that you care about that keep us safe. But we're -- I hate using sports metaphors, but we're on the 1 yard line, and we have high confidence that we'll push it over the line here in the next 4 to 6 weeks.

Got it. That's super helpful. And then maybe just a follow-up on Cellebrite Federal. Any sense of what the contribution was there in the quarter and progress there with regard to like building that out to better penetrate the federal vertical? I understand that shutdown to headwind but would love a little bit of color around where the efforts are focused there and how they're positioned as you kind of like head into fiscal '26.

Yes. The good news -- and just to -- I know it's a lot of babble when we go through these scripts. But the first half was tough. We sort of held the line. It certainly didn't deliver the growth that we had historically, which was the headwind for our full year. The good news is we got back in growth mode in Q3 and even better. It wasn't just growth. We nailed a couple of very strategic clients, and I'll let Marcus add some color because I think it's fair to use those wins as sort of a proxy for product fit and momentum and trust in the U.S. federal space. But Marcus, why don't you add some color?

Yes, sure. So it was actually a very strong quarter for Federal. The team executed particularly well. I'll draw attention to a couple of deals, and you guys know these are all in the public domain. You don't have to search too hard to find the names. But I won't do them an injustice and talk about them specifically, but I'll talk about a large agency, which does our protection services, placed a -- in excess of an $11 million order with us, which was a big expansion on previous years, including some new products. And we're very confident that, that was also a share-taking opportunity for us.

And then another agency following up very -- which is very well known in the market and protects a lot of us, we had our largest expansion year with them than we've ever had, so between 30% and 35% expansion on the base and then investigating new products and interestingly, taken us for the first time into the cloud. So we talked about this cloud journey. We're now seeing federal customers be a lot more aggressive in the movement to the cloud, which bodes exceptionally well for our ATO process with FedRAMP where we'll be taking advantage with the only cloud-enabled solution high in the market in the forensics segment. So good execution and we feel a lot more to come.

The other -- Brian, the other thing I would add before somebody asks is we've talked -- I think we talked in the last call about a very large client that we expected to renew in the first half of '26, and we expected that renewal rate to go up significantly. The numbers and performance in the U.S. Fed in the third quarter did not include any of that. So that is still in the hopper and still something that we expect to win and close in the first half of '26, which is material.

Our next question comes from Tomer Zilberman with Bank of America.

I wanted to ask about Federal and your thoughts around the performance this quarter, mostly wanting to ask how do you differentiate the growth this quarter from potential budget flush as it was their fiscal year-end versus maybe the more secular underlying recovery that you're talking about. And then I have a follow-up.

Yes. I mean budget flush is a thing. But I mean, remember, we're on the mission side, so this -- the products we have to be used. And so were not like -- we're not selling licenses for work processes. So we don't really unfortunately see budget flush because we're mission critical and we're program-driven. So I would like to think it's down to solid execution and a good product market fit has driven all of our gains in that sector. We didn't really see, because of the shutdowns or slowdowns, that normal, what we call, UFRs, which I'm sure you're familiar with, the unidentified funding requests. They were not a part of it. They were just solid execution into 3 or 4 of our key clients.

Got it. Got it. As a follow-up for Dave, I appreciate your commentary around your discussions with Sun Corp. It's been an ongoing conversation in the last few years. Just wanted to ask, as you speak with the other side, have you gauged any sense of urgency in terms of where that goes? Or do you foresee this being a long-term kind of trend?

I don't see urgency. I think going back to my prepared remarks, I see them being very organized, structured, thoughtful. Obviously, Sun Corporation owned 100%. It's come down over 55%. And so I think it is -- you'll find them, again, measured and thoughtful and rational. And I think that's what we're hoping to communicate to everybody.

Yes. I mean, obviously, that's stuff that we don't have full control or, you could argue, even limited control over, but the devil's in the details of your question. When you say long term, is your expectation -- your question about a sell-down over 5 years or over 5 months or -- but I think to Dave's point, they've been pecking away for years. Our guess is they'll continue to peck away and I don't -- since I don't have control or insight to the specifics, but I would expect to see -- my guess is you'll see some more sell-down over the more -- the near future than, say, a 5-year horizon.

Our next question comes from Louie DiPalma with William Blair.

Tom, David, Marcus and Andrew, congrats on the EBITDA guidance raise.

Thank you.

How should investors view the positioning of Guardian Investigate relative to Pathfinder? And are you still working on a SaaS version of Pathfinder?

Great question. It's really a good question because it's really important to our value prop and our strategy as we go forward. Pathfinder will persist. Think of Pathfinder as either on-prem or VPC-based analytic engine that is optimized for processing correlations and analytics and insights when you have multiple followings and the data sources we control.

Now fast forward to Guardian Investigate, which is an evolution from a lot of capability around the examiner and forensics into the world of the detective and the investigator to provide very -- not only robust case management capability but also the ingestion and the ability to drive work streams and collaboration across a broad range of different data sources, some of which we control and we create and some of which are created by other vendors in the ecosystem and then complement that Guardian Investigate with a cloud-based that's contrasted with Pathfinder as a VPC product, a cloud-based, very intensely AI-enabled analytic engine that can now prosecute and interrogate all the data that we surface that sits in Guardian Investigate and the data that we're able to pull in and combine with to drive what we think will be the most insightful analytic engine in the world of investigations.

Yes. And I can -- I'll follow on from Tom there and add the way -- the simple way to think about it is Pathfinder is from multiple extractions of multiple phones into the -- in teams in the hundreds, whereas when you look at Investigate, that is a multiple data source. So you actually need the horsepower and the number of our customers answering the question on cloud or on-prem, the nature of what they do with multiple phone extractions in the hundreds or dozens or even thousands, they need that on-prem power and they want to be off the cloud to do it. So there is going to be 2 variants. One is going to be cloud-based, and one is going to be on-prem. And the 2 actually interwork with each other and that they are not duplicative or replace each other at all.

That makes sense. So there likely will be customers that subscribe to both Pathfinder and Guardian Investigate, right?

100%. I mean Guardian Investigate is actually one of industry's first forays into multi-data source. For instance, being able to ingest CDR records with and then cross reference those to the cell phone is very powerful. And so that will be a functionality that would be pervasive within Investigate and will be additive to the deep work that we do in the cell phone extraction on Pathfinder. They're completely competitive.

Our next question comes from Bhavin shah with Deutsche Bank.

Congrats from me as well. I guess, first, just maybe a little bit on the defense and intelligence kind of vertical. Can you just talk about the pipeline there and how -- maybe how the go-to-market strategy and the sales cycles for this vertical compare to your core kind of buyers' buying centers?

Yes. So great, great question. Obviously, defense and intelligence has been strong for a number of years in the U.S. The U.S. previous -- in previous regimes was kind of policing the world in a number of areas. What we've now seen is some threats coming in from all over the world, particularly in Eastern Europe, as you know. We're seeing the NATO spend increase to the 2% commitment, and that is driving -- warfare is now not only physical. It's predominantly digital.

So what we're now seeing is, in Europe, I take this pipeline in Q4, my top 4 largest deals will actually all be defense and intelligence out of Europe. What we've now done is we are collaborating across all of my regions. We have a new single leader that we'll be appointing for D&I to actually drive that strategy forward. And we're very happy with where we are and where we're being brought into it.

Our accreditations in that space are second to none. The fact that we have ATO and heading to FedRAMP High puts us in a completely different level to the competition. We have a number of people that are ex -- I won't say that they're ex, but let's say they did things in the militaries, which kept us safe. And they are very well connected, and we are exceptionally grateful to the customers giving us a shot there, and we're very excited about the potential that we have on a global basis.

That's very helpful there. And maybe just as a follow-up for David. You talked about the EBITDA strength, and in your prepared remarks, you kind of noted disciplined hiring. How much of that maybe lower-than-expected hiring is a function of volatility in the Federal business versus kind of efficiencies you might be getting from GenAI or other areas? And then as you talk about targeting accelerating ARR growth next year, how does hiring play a role there?

That's a great question. Right now, I think we are -- the disciplined hiring, I think, from a capital allocation, really, we think about what's going into product. So you heard about Investigate. You've heard about just the other AI initiatives that are going across all products, and those are prioritized. And that's what we're going after. We have, I think, a very detailed go-to-market model with Marcus that we run. And so I'd say our -- we have our hiring model. I think we have our AI initiatives that are driving efficiency across our business. And I guess that is the disciplined framework that we use to guide how we're doing. And so I think we have a long-term orientation around our business, around how to capture and fulfill our long-range model, and that kind of works its way back into our hiring decisions.

Yes. I mean I would add that our ramp of head count growth has been on a steady decline the last 3 years because of improved efficiencies and much of which is AI-enabled, and that will continue in 2026. And I would tell you that of the modest growth, roughly half of it is going into our go-to-market organization so that Marcus can respond to interest levels and opportunities across both the public and private sector around the world. So -- but it's a healthy story.

We're able to express in sales an increase in quota carrier ratios to the back-office functionality that you see in the go-to-market line. So we're always increasing that ratio of actual people to deal with customers away from back office, and we see that they continue for a sustainable amount of time.

Our next question comes from Shaul Eyal with TD Cowen.

Congrats on the strong set of results and outperformance. My question is on the competitive landscape. So Cellebrite operates in the market, I think, characterized by high barriers of entry. What can you tell us on the current competitive landscape? And are you seeing -- have you seen any newcomers into new adjacencies in the current market?

Yes, I'll take that one. First, to get to the end of your question, there's no -- to your point, about barriers to entry, that's a very real observation. And as a result, we would not be able to call out or point to any -- there's always start-ups and pop-ups in every industry, but there's no material new entrants from a competitive perspective. So we continue to see the same people.

We have good competition. We respect our competitors. They're good companies. But I got to tell you, we sort of like our hand and how we stack up right now. And as some of the things I alluded to sort of hit the shores over the next 90 days, our view is that our competitive positioning is going to increase very quickly, so same competitors, good companies but like where we sit.

Yes, I'll add, we feel very comfortable. Again, we have some strong competitors. We respect them a lot. But as I said, I think with Tom, we agree we have a winning hand here. I would say that what we do have is the ability to manage and control the workflows and the data puts us in prime position. There are a number of AI entrants. If anyone went to IACP, you would see them. But for me, they open up not only potentially a partnership but M&A opportunities for us. But again, we back our own AI ability to understand it's a difficult industry to break into from just customer intimacy and also from understanding the sensitivity to data. It's not -- it's very hard to trust people that are coming in with a new AI algorithm written in vibe code that you think is going to take it apart. That's not what our customer base is going to do, and so we're comfortable with our position to expand there.

Yes. And not to double pile on, but given the sensitivity of what we do, who we help and what their mission is, they have the brand and the track record and the proven capability of the limited vendors in this space are a big deal. This isn't some back-office trivial thing that people are willing to take flyers on. It's important to them that they deal with people they have dealt with for 20 years that have delivered, that are focused and committed to the space and that they trust.

It's hard to outsell when it's called the Cellebrite report when they go to court and they say, "I've Cellebrited a phone." That's very hard to undo. That's become in the mindset of our customers over a number of years.

Our next question comes from Mike Cikos with Needham.

I'll echo my congratulations on the strong results, the reiterated ARR guide and then the confidence that you guys are executing as far as that top line reacceleration for next year. So congrats on that. I just wanted to unpack a couple of items here, but great to see that U.S. Federal returned to this growth dynamic. I don't want to be dismissive. I believe you guys called it out a couple of times in the prepared remarks, but the strength that you saw out of U.S. state and local as well as Latin America, can you kind of unpack that a bit more as far as what you saw from those 2 segments, the durability of that growth from where we stand here and maybe potentially size up what the contribution was if we're trying to stack rank drivers of outperformance? Sorry, I know a lot to unpack, but again, it was a solid quarter for execution. And I just wanted to highlight that.

Yes. Sure. Great question. And my SLG leader will be -- she'll be very thankful that you're giving us some props because they continue to execute consistently and to a certain extent, is a gift that keeps giving. So what are the drivers? The crime type in the U.S. continues to be digitally driven. So what I mean by that is there are a number of cases and investigations that require the unpacking phones. Most agencies we sell to still have a backlog of cases and a backlog of phones, and that means that our driver is not limited by that. Now unfortunately, that's crime. But that is what we need -- that is what we see. There is no end in sight.

We also saw, even through the shutdown, grant budgets were available. So the government was actually working hard to get the grants out because these grants matter, because they know that a number of people rely on them to meet their objectives in case reduction and solving crime. So that was the driver there, and there's no end in sight.

We're very comfortable with our competitive position there. We've got a good team, and Nicole and team continue to execute exceptionally well. So thank you to her and Zach, for what they do. Lat Am is great. I mean, Lat Am is an example of, again, high crime units, very well connected at a national level, a solid team, which works very well with partners and sell the end-to-end solution.

So if you look at the perfect way to execute, then my goal as a CRO is to get everyone to be in the same boat as Lat Am with our end-to-end solutions. They truly believe in the C2C and deliver the C2C, the case to closure, and execute incredibly well. We are also very well collected politically with a number of senior sellers that have been in that region for a number of years, which is actually very hard to compete against. So 2 great teams. And thank you for reflecting that, but we don't see their growth rates slowing.

Our next question comes from Eric Martinuzzi with Lake Street.

My question has to do with the use of cash. You finished the quarter real strong, the cash balance at -- close to $600 million. Now I know you've got a check to write when Corellium closes. That's $170 million but still will leave you with a substantial balance here. Just curious to know your priorities as far as internally focused, maybe more M&A. What's the use of cash post Corellium?

I'll let Dave take the first pass at this, and then I might jump in and add color. But Dave, why don't you take it?

Yes, let me maybe just round out one data point. So Corellium, you're right, that will be a significant piece of cash when that closes, which we're so incredibly excited about, but that's $150 million, not $170 million. And so I think when we look at it, again, looking forward to getting them onboard. Obviously, we'll continue to invest. And so you're right, over, call it, 2 quarters of the normal OpEx cash that we would keep, so call it, $150 million to $160 million, we are maintaining a little bit of surplus cash. We do look at this as a pretty interesting opportunity, both in terms of companies like Corellium that are rapidly scaling. We also see some other adjacencies. And so I think we're going to continue to maintain some flexibility, so we can continue to grow the business.

Our next question comes from Jonathan Ho with William Blair.

Let me echo my congratulations as well. With your Inseyets conversions ahead of schedule, what does that mean for you from a future ARR and upsell perspective, particularly as these customers fully utilize the suite and maybe start to renew?

Yes, it's a great question. I mean it means that we are expanding our cross-sell opportunity. The important thing for Inseyets, Inseyets was the first position to allow us to get to our case to closure, which then means storing and then analyzing and workflowing the data. So most of our customers wanted to get the initial work done to get on to a much more modernized extraction and review technology, which they now have. So we now see the expansion potential going across into our Guardian platform and our Pathfinder platform.

But it does also open up in the D&I and this is why D&I is such a key part for us, where Inseyets is fully -- not fully tapped. We do see with our triage functionality, working in the field in different use cases, a TAM expansion for Inseyets into the D&I on a global basis. So we got a nice vector to continue.

We're not through the base yet. We still have work to do in 2026, and then we'll be moving in. And we already have thoughts about our next version of Inseyets, clearly, which is going to be moving decoding into a different format to enable our customers to do even more, even quicker and increase their productivity again. So Inseyets, at the end, it's a part of the journey, and there will be a son of Inseyets coming along at some point.

Yes. And the other thing I would add to that is not very sexy but unit growth. I mean those macros I talked about, almost any agency you go talk to today, they've got huge case backlogs. And crime, unfortunately, for all of us, as I said, isn't going away, and the use of digital is -- was in the 90% range. It's eventually going to be pushing 100%. And so there's unit growth opportunity in -- even where we've migrated people to Inseyets, you have pricing power. You have unit growth plus all the cross-sell, plus the acquisitions, plus, plus, plus. So they're -- and not all fuels and contribute to the optimism. I think you're hearing about our opportunity to maintain our growth into -- accelerated actually into 2026.

There's also one thing if I could pile in on this. We're breaking the link between the number of operators and the number of licenses. I mean previously, there was -- it was an operator could only extract so many phones. Our automation and workflow tools allow that process to be automated. And so the actual number of licenses per user can increase pretty dramatically and start eating into those backlogs as we get into '26.

And I know we're at the end here, but the other thing that it creates an opportunity that we don't talk a lot about is the cloud and storage economics around Guardian. We collect more and more petabytes of information. Assuming that we thoughtfully price and package that offering, that becomes another ramp of growth -- of profitable growth for the company that did not exist a few years ago.

This concludes the Q&A portion of today's call. I would now like to turn the floor over to Andrew Kramer for additional or closing remarks.

Thank you very much, Angela, and thank you very much to our analysts and our shareholders, prospective shareholders for their participation today. If you do have questions, feel free to reach out to Investor Relations. There are a number of virtual and in-person engagements that we have scheduled over the coming weeks, and we look forward to speaking with you at that time. Thank you very much.

Thank you. This concludes today's Cellebrite Third Quarter 2025 Financial Results Conference Call. Please disconnect your line at this time, and have a wonderful day.