Cellebrite DI .(CLBT) - 2023 Q3 - Quarterly Report

Second Quarter 2023 Results Announcement Cellebrite announced strong Q2 2023 financial results, raising its full-year outlook and highlighting significant business and operational achievements Second Quarter 2023 Financial Highlights Cellebrite reported strong Q2 2023 financial performance with 23% revenue growth and 28% ARR increase, leading to a raised full-year outlook Q2 2023 Key Financial Metrics (U.S. Dollars in millions) | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Revenue | $76.7 million | 23% Increase | | Subscription Revenue | $67.2 million | 35% Increase | | Annual Recurring Revenue (ARR) | $273.7 million | 28% Increase | | Adjusted EBITDA | $11.1 million | - | | Adjusted EBITDA Margin | 14.5% | - | | Non-GAAP Net Income | $10.7 million | - | | Non-GAAP Diluted EPS | $0.05 | - | - The company has increased its 2023 outlook for revenue, ARR, and adjusted EBITDA, reflecting solid momentum in a healthy market[1][2] - The recurring revenue dollar-based net retention rate was 125%, indicating strong customer retention and expansion[2] Business and Operational Highlights Cellebrite demonstrated strong Q2 2023 business momentum, closing 25 large deals, expanding key customer engagements, and launching new product capabilities - Appointed Thomas E. Hogan as Executive Chairman of the Board of Directors[11] - Closed 25 large deals, each valued at $500,000 or more, in Q2 2023[11] - A large North American federal law enforcement agency expanded its engagement, expected to triple its ARR with Cellebrite to nearly $5 million[8] - Four federal forces in a Latin American country increased their annual spending with Cellebrite by more than tenfold[10] - Announced UFED Ultra, a next-generation Collect & Review solution, and new capabilities for Guardian, a SaaS-based evidence management solution[9][12] - Won five categories at the 2023 Forensic Focus 4:Cast Awards, including DFIR Commercial Tool of the Year and DFIR Team of the Year[32] Financial Outlook Cellebrite raised its full-year 2023 financial guidance, projecting revenue between $310 million and $320 million and ARR between $303 million and $313 million Updated 2023 Financial Outlook (as of August 8, 2023, U.S. Dollars in millions) | Metric | Original Expectations | Updated Expectations | | :--- | :--- | :--- | | 2023 Revenue | $305M - $315M | $310M - $320M | | Growth over 2022 | 13% - 16% | 15% - 18% | | December 2023 ARR | $300M - $310M | $303M - $313M | | Growth over 2022 | 21% - 25% | 22% - 26% | | 2023 Adjusted EBITDA | $35M - $40M | $39M - $44M | | 2023 Adjusted EBITDA Margin | 11% - 13% | 13% - 14% | - The CFO stated the company remains committed to funding investments in innovation, customer relationships, and organizational scaling while delivering accelerated growth and improved profitability[34] Financial Statements This section presents Cellebrite's condensed consolidated financial statements, including income, balance sheets, cash flows, and GAAP to non-GAAP reconciliations Condensed Consolidated Statements of (Loss) Income Cellebrite's Q2 2023 revenue grew to $76.7 million, achieving operating income, but a significant financial expense resulted in a GAAP net loss of $32.3 million Consolidated Statements of (Loss) Income (U.S. Dollars in thousands) | Metric | Q2 2023 (Unaudited) | Q2 2022 (Unaudited) | H1 2023 (Unaudited) | H1 2022 (Unaudited) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $76,684 | $62,573 | $147,918 | $124,958 | | Gross Profit | $63,653 | $49,475 | $122,481 | $100,877 | | Operating Income (Loss) | $4,623 | $(5,599) | $4,759 | $(7,545) | | Net (Loss) Income | $(32,348) | $33,197 | $(72,953) | $88,635 | | Diluted (Loss) EPS | $(0.17) | $0.17 | $(0.37) | $0.44 | Revenue Breakdown (U.S. Dollars in thousands) | Revenue Type | Q2 2023 (Unaudited) | Q2 2022 (Unaudited) | | :--- | :--- | :--- | | Total Subscription | $67,206 | $49,841 | | Other Non-recurring | $1,972 | $4,200 | | Professional Services | $7,506 | $8,532 | | Total Revenue | $76,684 | $62,573 | Condensed Consolidated Balance Sheets As of June 30, 2023, Cellebrite's total assets increased to $425.9 million, while total liabilities rose to $408.3 million, decreasing shareholders' equity Key Balance Sheet Items (U.S. Dollars in thousands) | Metric | June 30, 2023 (Unaudited) | Dec 31, 2022 (Audited) | | :--- | :--- | :--- | | Total Current Assets | $337,405 | $295,931 | | Total Assets | $425,893 | $403,293 | | Total Current Liabilities | $204,506 | $207,777 | | Total Liabilities | $408,337 | $329,428 | | Total Shareholders' Equity | $17,556 | $73,865 | - The increase in total liabilities was primarily driven by a rise in long-term liabilities from $121.7 million to $203.8 million, largely due to remeasurement of Warrant, Restricted Sponsor Shares, and Price Adjustment Shares liabilities[51] Condensed Consolidated Statements of Cash Flow For H1 2023, Cellebrite generated $29.1 million in operating cash flow, a significant improvement, with cash and cash equivalents reaching $110.5 million Consolidated Statements of Cash Flow (U.S. Dollars in thousands) | Metric | H1 2023 (Unaudited) | H1 2022 (Unaudited) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $29,052 | $(14,610) | | Net cash used in investing activities | $(14,806) | $(41,992) | | Net cash provided by financing activities | $8,419 | $4,688 | | Cash and cash equivalents at end of period | $110,502 | $91,685 | - The positive shift in operating cash flow was aided by non-cash adjustments, including remeasurement of warrant and share liabilities, and a significant decrease in trade receivables[25] Reconciliation of GAAP to Non-GAAP Financial Information Cellebrite reconciles GAAP to non-GAAP metrics, adjusting Q2 2023 GAAP operating income of $4.6 million to $9.4 million non-GAAP, and a GAAP net loss of $32.3 million to a non-GAAP net income of $10.7 million Reconciliation of GAAP to Non-GAAP Operating Income (Loss) (U.S. Dollars in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP Operating Income (Loss) | $4,623 | $(5,599) | $4,759 | $(7,545) | | Share based compensation | $4,600 | $3,605 | $9,057 | $6,463 | | Amortization of intangible assets | $840 | $664 | $1,636 | $1,328 | | Non-GAAP Operating Income (Loss) | $9,395 | $(936) | $15,048 | $1,698 | Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income (Loss) (U.S. Dollars in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP Net (Loss) Income | $(32,348) | $33,197 | $(72,953) | $88,635 | | Finance expense (income) from financial derivatives | $38,160 | $(38,391) | $78,953 | $(94,739) | | Share based compensation | $4,600 | $3,605 | $9,057 | $6,463 | | Non-GAAP Net Income (Loss) | $10,715 | $(25) | $17,614 | $1,395 | Other Information This section details Cellebrite's use of non-GAAP financial measures and KPIs, alongside cautionary statements regarding forward-looking information Non-GAAP Financial Measures and Key Performance Indicators Cellebrite uses non-GAAP financial measures and KPIs like ARR and NRR to supplement GAAP results, offering clearer insights into operational performance - The company uses non-GAAP measures to offer investors and management greater visibility to the underlying performance of its business[15][35] - Annual Recurring Revenue (ARR) is defined as the annualized value of active term-based subscription license contracts and maintenance contracts in effect at the end of a period[17] - Dollar-based Net Retention Rate (NRR) is calculated by dividing the recurring revenue from a base set of customers in the current period by the recurring revenue from the same customers in the prior period[40] Caution Regarding Forward-Looking Statements This report contains forward-looking statements regarding the company's 2023 financial outlook and future performance, subject to significant risks and uncertainties detailed in SEC filings - Forward-looking statements in the report include the 2023 financial outlook, anticipated business trajectory, and plans for revenue growth and profitability[43] - These statements are subject to numerous risks and uncertainties, including technological changes, dependence on government agencies, and competition. The company directs investors to its Form 20-F for a full list of risk factors[43]