Cellebrite DI Ltd. Class A Ordinary Shares 2026 Q2 Earnings Call

Thank you very much, operator, and good morning, everybody. Welcome to Cellebrite's second quarter 2026 financial results call. I am joined this morning by our primary speakers, Adam Clammer, Cellebrite's Chairman of the Board, Shiv Ramji, Cellebrite's new CEO, and David Barter, Cellebrite's CFO. Shiv, Dave, and Marcus Jewell, our CRO, will participate on 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 would like to remind everybody who is 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 two quarters of 2026, each quarter of 2025, along with the full year 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 are with the comparable periods of 2025. I would 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. With all that being said, I would 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 Shiv 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 three years ago as Executive Chairman, and we are 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 built a stronger foundation that positions this company well for the next chapter. We are very grateful for everything he has contributed and pleased that he will continue to support Shiv and the board as an advisor. I know many of you will ask, "Why Shiv, and why now?" 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 is best driven by a product-centric leader who is rooted in architecting scalable, cloud-native platforms that can maximize the impact of AI, which is 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 in technology into durable, profitable growth. 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. With that said, I will 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 am grateful for the foundation he has 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. 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 immediate shortfall was concentrated in a limited number of large transactions that we expected to close in the quarter but ultimately moved beyond our anticipated timelines. It is 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 cycles. I want to be clear, timing is not an excuse. We need to execute these opportunities better, identify risks earlier, and forecast the business with greater precision. Another factor impacting performance involves our Inseyets digital forensic solution. To be clear, we continue to make good progress converting customers to Inseyets, 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. 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 how we manage the business and prioritize investments. David 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? There are two immediate priorities. First, we are raising the standard for sales execution. We have completed a bottoms-up review of our pipeline and our largest opportunities. We are putting greater rigor on our 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. 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 forensics 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 one of our longstanding U.S. federal customers as part of a multi-product, multimillion-dollar deal. This customer placed an initial seven-figure order for Guardian alone that is nearly 35 times higher than the average annual spend of roughly $50,000 by a 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 product. 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 forensics, 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. AI will be an important part of that.