Welcome to the Cellebrite First Quarter 2025 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. 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, and welcome, everybody, to Cellebrite's first quarter 2025 financial results call. I'm joined today at our U.S. headquarters just outside of Washington DC by our primary speakers, Tom Hogan, Cellebrite's Interim CEO; and Dana Gerner, Cellebrite's CFO. Joining us in person is Marcus Jewell, our CRO, and Ronnen Armon, our Chief Products and Technology Officer, who is participating remotely. Marcus and Ronnen will be available during the Q&A. There's a slide presentation that accompanies our prepared remarks. Please advance the slides in the webcast viewer to follow our commentary. We will call out the slide number we're referring to in our remarks. This call is being recorded, and a replay of the recording will be made available on our website shortly after the call, along with a copy of the prepared remarks. Now starting on Slide number 2, a copy of today's press release and financial statements, including the GAAP to non-GAAP reconciliations, the slide presentation, and the quarterly financial tables, and supplemental historical financial information for each quarter of the past couple of years are available on the Investor Relations website at investors.cellebrite.com. Also, unless stated otherwise, our discussion of our first 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 are with the first quarter of 2024. In addition, please note that statements made during this call that are not statements of historical fact constitute forward-looking statements. All forward-looking statements are subject to risks and uncertainties and other factors that could cause matters expressed or implied by those forward-looking statements not to occur. They could also cause actual results to differ materially from historical results and/or from forecasts. Some of these forward-looking statements are discussed under the heading 'Risk Factors' and elsewhere in the company's Annual Report on Form 20-F filed with the SEC on March 18, 2025. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. Slide number 3 provides the agenda of the topics we'll cover on today's call. And with that being said, I'll now turn the call over to Tom Hogan. Tom?

Thanks, Andy. Let's just jump right in. Cellebrite delivered strong 23% year-on-year annual recurring revenue (ARR) growth in the first quarter. Consistent with our stewardship and managing both revenue and spend, we also delivered 34% year-on-year growth in our adjusted EBITDA, resulting in a 22% margin. The combination delivered a 45 Rule of X in the quarter and 48 for the trailing 12 months, both within our committed range of balanced performance. We remain committed to growth as our priority while dynamically tuning our spending to support our bottom line objectives. Overall, our value proposition continues to resonate in the market, interest in our platform remains healthy, uptake on our Insights solution continues to increase, and customers are realizing the brand promise of justice accelerated. Strength and overachievement in the U.S. state and local, LATAM, and the Asia Pacific regions were offset by modest shortfalls in the U.S. Federal segment and our EMEA geography. The strength of our total performance was a by-product of our global diversification and the range of our solutions across federal, state and local, defense, intelligence, and the private sector. Before adding further context to our federal business, I'll highlight two important barometers that continue to signal strength. First, we remain on track with our overall Insights migration, which is a direct reflection of the value delivered with our core digital forensics offering. We finished the first quarter with over 30% of our installed base converted, and we remain on track to hit our 2025 objective of a 50% conversion. Second, as we've shared, extending our value proposition to the critical cloud-based Guardian product as adoption of and interest in this purpose-built platform for collaboration and chain of custody continues to accelerate. We delivered our third consecutive quarter of year-over-year ARR growth of over 100%. The power of the Cellebrite platform is also reflected in our pipeline, where transactions that involve two or more of our flagship solutions carry a disproportionate increase in average deal size, in many cases representing 10x the size of Insight standalone transactions. Now let me add some perspective around our federal business. I first want to remind people that this business has produced a 25% CAGR in ARR over each of the past three years and it represents roughly 17% of our 2024 revenue. Today, despite current volatility, our view is that the opportunities for future growth may not only remain attractive but have increased meaningfully over the past two quarters. This is a function of multiple current and emerging tailwinds, starting with the structural changes associated with the recent launch of our Cellebrite Federal Solutions unit and our ongoing investment to achieve FedRAMP authorization to operate. These actions are amplified by the emerging macros around the increased sophistication of technology used in the pursuit of crime, including AI, along with the increased alignment of our portfolio with the new administration's focus on securing our borders, mitigating the fentanyl epidemic and overall drug trafficking, reducing the heinous human trafficking industry, and finally improving the overall productivity of all government agencies. While the short-term federal environment remains choppy, our full-year 2025 pipeline continues to expand. Our solutions are simply mission-critical to safety and security across all levels of government, and the spend related to the Cellebrite solutions remains small relative to both our societal impact and overall department budgets. Dana will cover our second-quarter guidance in detail, but I want to share in advance that while our outlook assumes that a continuation of the first quarter federal spending environment will persist into the second quarter, we see a clear opportunity to reaccelerate in the second half given the expanding pipeline and the traditionally strong seasonality of the third quarter in the U.S. Government. In EMEA, we're equally bullish on our pipeline and interest and expect our investments in our go-to-market teams will deliver an acceleration in the region in the second half of 2025. Within the past 30 days, our entire board and our executive team have spent two full weeks in the U.K. region and Germany to clearly demonstrate the company's commitment to the region and both visits were well received by customers, prospects, and our team on the ground. Finally, I want to call out one segment in particular across the globe that has witnessed a material increase in opportunities, which is the intelligence and defense sector, which tracks with what I think we're all seeing in global geopolitics. This is a segment we're doubling down on from a messaging, positioning, and coverage perspective to ensure we meet demand and opportunity. Before moving forward, I would reiterate that our U.S. state and local, Asia-Pacific, and Latin America units delivered strong growth and continued momentum in the quarter. To summarize, our first-quarter performance, before doing a quick click down on a few strategic milestones, I'd reiterate four things. First, Cellebrite continued to deliver robust year-over-year growth in ARR and revenue to support a rule of X performance in our target for 45 to 50 range. Second, Intelligence and Defense needs combined with digitally enabled crime continue to escalate in both size and sophistication, thus driving increased demand. Third, our bottom line grew faster than the top line at 34%, highlighting the operating leverage inherent in our business model and reflecting positively on our ongoing commitment to drive profitable growth. And fourth, traction with our insights migration and the strategic penetration of our Guardian and Pathfinder products remain strong and on track. Let me switch gears and talk about a couple of important milestones that were core to our business. First, a major go-to-market highlight occurred last month when we held our first-ever user conference. This Washington D.C. event was sold out, attracting roughly 700 attendees from approximately 350 agencies and enterprises spanning 27 different countries. The energy, feedback, and collaboration with our customers were both palpable and motivating. We also launched our inaugural Digital Justice Awards. The winners of the 2025 Justies represented 10 categories including the Case of the Year and recognized law enforcement and intelligence officers for exceptional service in the pursuit of justice. Our 2025 user conference represented meaningful progress toward our goal of establishing the Justies and this Summit as the premier customer event in digital investigations. We look forward to next year's award ceremony, along with a significant expansion in our 2026 summit attendance. From a product and portfolio perspective, we announced our new Spring 2025 release on May 6th, featuring our new Cloud foundation and AI-powered innovations across the portfolio. The evolution of the Cellebrite cloud enables us to deliver a purpose-built user experience that scales investigative capabilities and accelerates decision-making across public safety, intelligence, and enterprise sectors. We continue to see strong adoption of our cloud-enabled offerings which are rapidly approaching 20% of our total ARR. At the same time, we delivered new AI-powered features and functionality aimed at elevating productivity and efficiency across our flagship offerings while always keeping human expertise and engagement at its core. To better reflect the emerging importance of Cellebrite to both the intelligence and defense segments as well as our ongoing value in the private sector, the Case to Closure platform has been rebranded as the leading digital investigation platform. Finally, let me update you all on the status of our CEO search. Over the past four months we've had the pleasure of meeting with a long list of eminently qualified candidates. We can't share those names for obvious reasons, and our interest in several of these candidates remains high. As we committed, we've been deliberate in this process to ensure we secure the right best leader. It's not just our shareholders, our employees, and our customers that deserve a world-class leader; our belief is that safety in our world also depends on it. I want to also assure all of you that this company has not been in a holding pattern while this search has progressed. On the contrary, our board, our team of senior leaders, and I have moved with daily urgency, balancing the requisite focus on the present with an equally important eye on our future. As a result, we've elevated work on our strategic options, including, as you would expect, inorganic opportunities to expand our total addressable market (TAM) and help fuel our long-term growth. As I've discussed in multiple forums over the past three months, I consider my current duties the professional privilege of my lifetime. While I've led organizations 100 times the size, I've never led a company that wakes up every morning dedicated to making our neighborhoods, cities, country, and institutions safer. I'm honored every day to partner with the men and the women at Cellebrite and the dedicated and courageous customers we serve. My commitment to our board and our shareholders is to optimize value creation, enable the important mission of our customers, grow and reward our people, and usher in the next generation of leadership. Let's turn to Slide 6 to conclude my remarks. We delivered solid first quarter top-line growth while modestly expanding operating margins to outperform on the bottom line. We live in unusually turbulent times and the world needs the mission-critical intellectual property we uniquely deliver. The tailwinds and malfeasance, now exacerbated by the increased technological sophistication of bad actors, provide a firm foundation for healthy global demand over the coming years. As the market leader and technology innovator in this space, we're committed to extending our capabilities in AI, cloud-related agility, investigative case and evidential management. Our mission and our impact remain in the early innings as we bring the world's most advanced technologies to ensuring a better, safer world. The future remains incredibly bright for this company. With that, I'll turn the call over to Dana to provide further detail on our results and our outlook. Dana?

Thank you, Tom. Despite market turbulence in the U.S. Federal sector, Cellebrite delivered top-line results for the first quarter that were in line with our plans. While the combination of our revenue growth and prudent spending enabled us to outperform our Q1 profitability targets, just as important, we remain well positioned to continue expanding our business. Let's start our review on slide 8. Our ARR for the 12-month period grew 23% to $408 million, largely driven by increased spending within our installed base customer. Consistent with Tom's earlier commentary, we enjoyed ARR results that were largely in line with our plans in most geographies and customer verticals. Although the spending headwinds within the U.S. Federal and EMEA sectors limited our upside for the quarter. As noted on the slide, our gross retention held relatively steady at 92% with standout retention levels in the U.S. and Asia Pacific. Geographically, the March 2025 ARR mix was in line with the prior year. The Americas represented 54% of total ARR, with EMEA at 34% and Asia Pacific at 12%. In terms of growth rates by geography, the Americas grew 27% with a vibrant performance in the SLG and Latin America segments. ARR grew 28% in the Asia Pacific region, followed by 15% expansion in EMEA. Let's turn to Slide 9 to dive a little deeper into the ARR growth drivers from a product family perspective as well as highlight a few deals that stood out in the quarter. As illustrated on the chart on the left-hand side of the slide, the majority of our net ARR expansion was driven by higher demand for our family of Insights offerings, including our legacy digital forensic solutions. Within the Blue Insights contribution, we outlined the financial uplift associated with transitioning our installed base of legacy digital forensics licenses to Insights, which was a high single-digit percentage of the $104 million net increase in ARR. To be clear, this is intended to represent only the increased spend by customers when they move to Insights. The first win listed on this slide, a new logo win, is a great example of how customers are deploying our technology in the field. In addition to conventional lab environments, we are seeing more opportunities to extend our technology out into the field as one of our competitors has become increasingly vulnerable in this area. The second deal in the middle reinforces our success in expanding adoption of our unlock module when customers convert to Insight as well as the opportunity within the global defense and intelligence sector. The third win involving Guardian highlights how this solution is fortifying the chain of custody while enabling us to expand our wallet share within existing accounts. As we look ahead, we remain optimistic about the growth opportunity for both Guardian and Pathfinder, as each product family remains under 5% penetrated across our installed customer base. Guardian's ARR growth rate is accelerating, exceeding 100% for the third straight quarter as the number of customers using both Insight and Guardian nearly tripled from one year ago. Turning to Slide 10, we generated first quarter revenue of $107.5 million which increased 20% from the prior year due primarily to subscription revenue growth of 21%. Approximately 89% of total revenue was associated with subscription-based software solutions. Our Q1 revenue was at the lower end of our targeted range due primarily to the timing of orders within U.S. Federal and EMEA theatres. Let's move to Slide 11 for a review of our non-GAAP gross margins and non-GAAP operating expenses which exclude share-based compensation, amortization of intangible assets, and acquisition-related expenses. Our first quarter 2025 gross margins of 84.4% was in line with our full-year 2025 target range. The 130 basis point decline from the prior year primarily reflects higher incremental cost for hosting an investment to build out our customer success organization. In terms of operating expenses, first quarter operating costs were $68.8 million, a 13% year-over-year increase. This primarily reflects higher personnel costs associated with higher headcount and annual merit adjustments, increased event costs, and higher consulting expenses. We ended the first quarter with 1,182 employees. Turning to Slide 12, the combination of top line growth, solid gross margins, and prudent spending resulted in Q1 adjusted EBITDA of $23.7 million, or 22% on a margin basis. The year-over-year improvement of 2.3 percentage points reflects solid operating leverage as our top line growth continues to outpace operational spending. We reported first quarter non-GAAP operating income of $22 million, with non-GAAP net income of $26.2 million, or $0.10 on a fully diluted basis. Our diluted non-GAAP EPS grew 25% despite a 20% increase in our average weighted diluted shares outstanding. We ended the first quarter with $509.8 million in cash, cash equivalents, and investments, an increase of $26 million from the fourth quarter of 2024 and an increase of $162.5 million from the same period one year ago. Free cash flow for the first quarter, which we define as net cash provided by operating activities, less capital expenditure and the purchase of intangible assets, was $18.5 million, up strongly from one year ago due primarily to strong fundamental results. Now let's move to Slide 13 for our outlook along with some insights on the factors and trends that we believe will shape this year. A reminder, we have historically generated the majority of our ARR revenue and adjusted EBITDA in the second half of any given year, and we believe that this trend will repeat itself in 2025. Looking at the second quarter, we currently expect Q2 ARR in the range of $416 million to $426 million, which represents growth of 20% to 23%. While most geographies and customer verticals are anticipated to continue performing well during the first half of the year, we believe it is prudent to model a continuation of spending constraints in the U.S. Federal sector. Our pipeline does suggest a possible recovery in the second quarter, but until that manifests itself in closed transactions, we will remain justifiably cautious. Our Q2 revenue outlook ranges from $110 million to $116 million, which translates into growth of 15% to 21%. This would result in our first half revenue of approximately $218 million to $224 million, or approximately 46% of what we expect for our full-year 2025 revenue, which is generally consistent with historical trends. The spending climate within the U.S. Federal market is also affecting those who provide consulting and other professional services. We are not immune from those headwinds and we see near-term pressure on one-time professional services revenue from U.S. federal agencies. Consistent with our cautious stance on the second quarter, we have marginally reduced the low end of the full-year 2025 revenue by $10 million while also resetting the high end of this range. While we remain optimistic that we will see stronger second half spending by our customers, particularly in the U.S. Federal EMEA, we believe that adjusting the revenue range in such a manner more accurately captures the top line risks associated with an extension in spending constraints. The majority of low-end revenue reduction is associated with the shifted timing of new business to the second half of the year, combined with lower one-time professional services revenue. We are not adjusting our full-year guidance on ARR and EBITDA. We expect our Q2 gross margins to be within our full-year 2025 gross margins target range of 84% to 85%. We remain very focused on disciplined cost management while funding important investments that are critical to further expanding our business over the long term. While U.S. tariff policies remain fluid and require careful assessment in the event of any meaningful changes, we do believe that the current tariff of imports to the U.S. will be de minimis to our overall cost of goods sold. We anticipate our Q2 operating costs will be in the range of $69 million to $71 million, which is flat to slightly higher than over Q1 levels and consistent with the historical cadence of our operating expense growth from the first quarter to the second. These expectations set the stand for Q2 adjusted EBITDA in the range of $26 million to $28 million, or approximately 24% on a margin basis, which keeps us on track with a full-year target. In terms of a weighted average diluted share count, we expect Q2 to approximately be in the mid-250 million share range. In summary, we remain focused on growth while equally committed to the responsible management of our cost structure in order to achieve our adjusted EBITDA targets in absolute dollar terms under different potential revenue outcomes. Since entering the public safety market in 2007, we have established a track record for durable, profitable growth, which is reflected in both our absolute ARR and in the strength of our balance sheet. That type of performance speaks volumes about the global need for our solutions and our ability to successfully navigate our business through an era of geopolitical market challenges and technology shifts. We are executing well against our plans and remain enthusiastic about the prospects for achieving the ambitious targets we set for this year. That concludes our prepared remarks. Operator, we are now ready for Q&A.

Thank you. Our first question is coming from Tomer Zilberman with Bank of America. Your line is open. Please go ahead.

Hey guys, good morning. If I think about your commentary last quarter about the Federal sector, I believe you said that the weakness was really stemming from the stabilization of the new administration coming in. And as you look to the outlook today, the question is, are you seeing any deterioration in the demand environment in terms of anything from DOGE or tariffs or policy changes, anything different that you're seeing from 90 days ago?

I'm going to let Marcus make a comment here. This is Tom. There's no material change from a leadership decision-making perspective. There's still a little bit of fluidity in that environment. But what we are seeing, which gives us the optimism we've alluded to in the second half, is the pipeline and new opportunities that are surfacing given the administration's priorities and where they are allocating dollars is actually, we've witnessed a fairly meaningful uptick. The bottom line is crime is not going away. The need for this software is getting more important given the sophistication of technology and the pursuit of crime. And a bulk of the efforts that are sort of DOGE-related are more focused, we believe, on a combination of personnel and for those of you that follow software shelfware. And the one thing that Cellebrite's never been accused of is shelfware. If anything, agencies are starving for more of our product to keep up with backlogs. So the short term is choppy and we wish it weren't so. But as we think about the need and the opportunity in federal for us, we're actually gaining more optimism versus concern. If you want to add anything, Marcus.

Yes, it's a great question, Tomer. So adding to Tom's point, look, we're mission critical. We are not what I call a bright shiny object or an IT widget, which Tom calls pleasantly shelf ware. The key there, what we're seeing is certain programs under DOGE have come to an end, but they're being replaced by new programs. Let me give you a real-life example. We had a special funding program into the DoD, we can't name it for obvious reasons, which was multiple millions for forward-deployed operatives. People that are out there doing the real hard graft protecting the U.S. that program is actually replaced by a larger program which will come into play in the next three months. And we feel very comfortable in our position there at the executive level. So what we're seeing is this change through DOGE. And what we have seen a little bit is everything got wrapped up through the process. So when they did the blanket cuts that they did, there was just some freezing and deployment changes. But we feel very comfortable about the future, and in fact, we see new projects accelerating. We're just hoping that the Memorial Day budget, which is a big impact for us, if that gets approved, things settle down to a certain extent and then we'll have more clarity going into Q3.

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

It's great. I mean, so basically on that basis, what you can look at is what are the use cases we're solving for? And so the use cases we're solving for in the federal government are fundamentally around three elements. They're around intelligence, counterintelligence, human trafficking, those crimes and those necessities are increasing. There are certain things which are going to happen in the U.S. There's a World Cup coming to the U.S. which, if you think about it, will be one of the biggest human trafficking issues that this country is going to face in a long time. It will drive that. So we're seeing these new projects come in very early in the pipeline and then mature very quickly, which gives us confidence that on the net adds for what I call early pipeline that is increasing. It's the decision-making in the executive teams which are taking time to settle into their new roles, which means that the second half of the sale has been a little cloudy, but we see that clearing up. And again, I do think I'm going to repeat that the budget element after Memorial Day will give stability and clarity to some of those projects. And I think that's consistent feedback from other people that sell to the federal market have given in this quarter.

Yes. And if I kicked up that comment one level and having sort of been through this stuff a bunch of times over the last 45 years, the three things you look at are is your pipeline growing or shrinking? You do the competitive analysis: are you losing to competition? And the answer is no. And then are the macros changing? And sadly, populations are going up, the use of technology is going up, crime is minimally flat. Maybe violent crime may be flat to down a little, but crime overall and some of the things like drug trafficking, human trafficking, Internet crimes against children, those crimes are going up. So the macros are building in a favorable way. There's no change in the competitive win-loss dynamic, and our pipeline is improving. So now it's just a matter of timing and clearing some of these timing hurdles and executing.

Got it. Thank you.

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

Great. Thanks for taking the questions. Just a couple from me, maybe Tom, on FedRAMP at this point, I think mid-year was the target. June, July, obviously, a lot of chaos in federal. But just talk about timing toward FedRAMP and then also what you can do with deal cycles to be ready for when you get the actual FedRAMP certification. So a little update there, please?

Yes, we're still pushing. I think the last time, the last call, we talked about getting ATO in the third quarter. For those of you that are FedRAMP mavens, there's two pieces to it. One is getting readiness, which is have you done all the things you need to do to your stack and your product to deliver the security requirements and compliance for FedRAMP certification? That's the long pole in the tent. That's the effort that took us a little over a year. As we shared, there are different levels of FedRAMP. We shot for the highest level given our aspirations to solve the most complex, sensitive issues in the government, which was level four. We received level four readiness status about three months ago. So the last thing we needed was to get a federal agency to sort of raise their hand and say, we're going to be your godfather and and sponsor. And once that happens, it's typically about a 90-day process to get authorization to operate. Candidly, we think we're close. We thought we were close 60 days ago, sort of on the five or 10 yard line to getting one of two targeted agencies to raise their hand. And just given all the DOGE related activity, those organizations remain interested but haven't committed yet. So our expectation is to get that done, as I said, in the next 30 days, then add another 30 days for the ATO. And so we're still pushing for the end of the third quarter. To your point on what can you do? The good news is the agencies that would want to take advantage of our FedRAMP status are well aware that we've achieved readiness. So number one, they know we're committed. Number two, we've spent a lot of money and time already to get the readiness status. They all understand the last mile is the sponsorship, and so we're able to celebrate federal team has been able to engage in discussions with target agencies knowing that this is pending. The last thing we can't do just yet is bid a project that might be scheduled to close, say in the next quarter or two. So this, by the way, we also shared when we announced this that you shouldn't expect a big uplift in federal bookings and performance in 2025. That is still the case because of the timing issues, but we do think it's important to get this over the line in the timeframe I just discussed so that as people start to plan their 2026 spend, we're able to participate more fully. And so that sort of opportunity and plan remains on track for us.

Great. Thanks for the color there. And then on the EMEA effort, it sounds like you took the initiative. You mentioned the U.K. and Germany. I don't want to read my caller into it, just the promptings to lead you to go do that and the results of that trip.

Yes, I'd say it was two things. One, we make a point of communicating to the market, to our investors, to our customers, our prospects, our employees, that this is truly a global company. Our genesis and our roots are clearly in Israel. But our ownership, as you know, Jeff, is north of 40% owned by a Japanese corporation. Over 50% of our business is conducted in the United States. Over 50% of our employees are outside of Israel. So we're very much a global company. And my view is you walk the talk. You don't just tell people you're global. You get out of your office and you get out into the world so that you can meet and greet and put names and faces and demonstrate commitment not only to our employees, but to our customers. And with our, with the big presence and footprint we have in the U.S. and here in Washington D.C. and the fact that Europe represents, Dana, what's the percentage roughly of our revenue?

34%.

34% of our business. We said, when do we bring our executive team? When do we bring our board to Europe and for that matter down in AsiaPac? And so this was a decision I took. We hosted our executive quarterly off-site meeting, brought the whole leadership team to London three weeks ago for a full week of meeting with customers and employees. And then last week for the first time, we hosted the Cellebrite quarterly board meeting in Munich to do the exact same thing. Spent the entire week there, met with multiple agencies, met with the Met Police in London, met with the Fed Police, which is a federal police department in Germany. We hosted a C2C equivalent event that we did two months ago in Washington. We ran one in Germany. It was very well attended. So it was really. It's a long answer to your short question is we're a global company and my view is let's get the leadership of this company out in the field listening and connecting with both our customers and our people.

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

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

Why not be more conservative on the second half?

What gives you that confidence? Again, just because it feels like there's such a moving target out there day to day.

It's a fair question, and trust me, as you go through these things, and we decided in the spirit of transparency and integrity on the revenue, given the shift in seasonality combined with some of the one-time services business flow, we felt like it was the right thing to do to adjust the low end by I think we took it down $10 million. But as we look at run rates, as we look at pipeline and performance across the rest of the portfolio, and I'll highlight again, we had strong performance in the U.S. state and local was extremely strong, which is a reflection of the value and the impact of our software. Latin America is on fire. AsiaPac had a great quarter. And then you come back to federal and say, okay, it's almost 20% of our business. If they show up, even if they just get a little better, I think it positions us to deliver the full year guide that we shared which we thought was pretty strong to start with. And when you combine that with the fact that if you go, I wish all of our investors could sit down with senior leadership at some of these agencies. And I do it every day, every day. And when these people sit across the table from you and tell you how they cannot do their job, they cannot keep up with terrorists and murderers and pedophiles without our software. What that tells you is this isn't a gosh, do we need this? Gosh, Elon's pushing us to save 30%, and you're a casualty. They have to have this software. And so when that's a must-have and the macros aren't changing, that's why we believe as soon as this world settles down just a little bit more, we will see an uptick. Now, the issue is, is it a big whoosh, which it could be based on some of the pipeline opportunities that were unanticipated, that are starting to flow, or is it just an uptick? But that's what gives us the confidence that enough confidence to say, because you could do which a lot of companies are doing. We're abandoning guidance because we don't know. Or they're just, it's the baby with the bathwater. If you're going to take revenue down, take it all down, take your lumps now. I mean, you can imagine those conversations take place everywhere. But it's our belief that that's not going to come to pass and that the company's going to rebound and have a strong second half.

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

One other thing that we haven't highlighted yet that we think could contribute to the answer to your question is one area that is not getting, I'll just say as much pressure on the cost side is the area of intelligence and defense. For reasons that we all understand, if you follow geopolitics and what's happening around the world. And just to make an example, we all know that NATO and Europe is ramping up their spend in defense. Nobody's confused about that. And as they look at doing that and they look at securing the Eurozone borders, guess who might be able to help them? And so Cellebrite is moving swiftly to elevate our positioning, our messaging, our coverage to make sure that we're bringing our assets to bear in what is actually emerging as a growth segment that needs our technology contrasted with some of the pressure points in some of the more traditional agencies.

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

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

Yes, again, and I'll let Marcus comment because he's close on the ground on this, but I would tell you that Pathfinder is growing more in line with the core business as contrasted with Guardian, which has delivered its third straight quarter over 100%. And we want to avoid specifics, but I would just tell you it's a healthy beat above 100%. So that technology is the market's leading and we would argue only purpose-built repository for collaboration and chain of custody and is also a strategic control point in the enterprise is doing exceptionally well. Pathfinder, as I said, is growing more in line with the rest of the business. But we've delivered some new enhancements and capabilities as of very recently that we think will change the trajectory. Now all that said, we expect the penetration of Pathfinder. In a perfect world, you'd want 100% penetration of both products relative to Insights. We think a realistic target on Guardian right now is 50%, and that's really only constrained by sovereign level adoption of cloud technologies. So there are certain countries that just don't right now — I was just in Germany, and they're pretty reluctant to do anything in the cloud right now. And that'll change. But right now, that's where they stand. That's where Japan stands. Pathfinder, we think just given the scale dynamics is probably a 25% penetration versus 50%. But let me ask Marcus to give you his view on the current, but I think more importantly our optimistic view of the future of Pathfinder.

Yes, so Pathfinder was a major release of 10.4 this quarter, which brought a number of additional features, including a cloud-delivered opportunity for the product. What we're seeing with Pathfinder is it is excellent product-market fit. And a number of people on this call actually saw the demonstrations we did recently at our C2C, and I think you all agreed how powerful that product is. What we're now working on is making it more consumable for mass adoption. So when you bring out a product at the top end, you now need to scale it back. And that's what we've done in 10.4. So we're now seeing an increasing pipeline where we're actually growing, and we're very, very focused on the areas that we see adoption. And in line with Tom, we will see penetration rates as he aligned to.

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

Yes, indeed, there are a number. So the main thing out of the Memorial Day budget and fingers crossed, it happens, probably not Memorial Day, but I think that the mood music is it will happen that week. It allows to move from CR into the general tax status being set, which actually means then the department heads actually know that they've got their money for an extended period of time. What that then does is it reinvigorates and reinvigorates the special programs. There are a number; we couldn't list them all; they're all published on the website. But with our business development team, we've been doing a lot of work on Capitol Hill and at the state and local executive to make sure that we're well positioned for that security. So I would say there's probably eight or nine key programs which we don't document, which will flow from that program which are exciting for us. They're all around the same use cases: human trafficking, fentanyl, border safety. So you can look on the FedGov and see those programs pretty well documented.

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

Thank you. Good afternoon, Tom, Dana, Andy. Tom, my question is obviously on the U.S. Federal softness. I wanted to ask if you or Dana can quantify for us maybe the level of slippage you've seen during the quarter. Is it just a handful of deals that are pushed? And I'm getting some emails from investors asking was there any business that got cancelled? And I have a follow up.

So maybe I'll start. So in principle, Q1 for the federal government is usually a very weak or less important spending quarter. And that's what we are seeing in Q1. Result is very much in line with what we shared with the market, and we feel very comfortable with what we've seen there. But what we are seeing, as was alluded to by both Tom and Marcus before, is that closing of new business is being deferred and delayed. And that is what we are expecting to see in Q2 and impacting our forecast for Q2 and altogether the revenue of the year. Please note, we did not change the ARR because revenue is impacted by when the programs will come. ARR is for the full-year is less impactful by that. We assume that some of the new business decisions for Q2 will be deferred to Q3, and we will have an opportunity to have an uplift in Q3 still to be revisited after Memorial Day as mentioned by Marcus.

Got it. Thank you for that, Dana. Tom, you've indicated doubling down on the intelligence and defense sector. Totally understandable. Curious, who is the buyer within those departments? And I understand the difference between U.S. State and local. And maybe just a word about the corporate opportunity. I know it's small, but how has that performed this quarter? Thank you.

Do you want to take the buyer?

Yes. So the buyer in D&I, they're two different buyers, obviously. So in defense, we are mainly securing forward operations. So if you think about what happens, I mean, we can use the Ukraine war. I think Ukraine will talk to us about pretty much 95% of the soldiers captured from Russia will have a cell phone on them. And that cell phone will obviously need to be extracted because there'll be very relevant data that's going to protect. So war is very different than people imagine. The second thing in defense use case is mainly security of defense bases, foreign defense bases around the world being defended. Contractors come in, and those contractors could be terrorists or kind of terrorists. So there's a number of looking at the people that are working on those sites in the civil sector protecting. So that's the defense use case. When you then move into intelligence, you're really moving into counterintelligence and triage. This is field agents who are capturing multiple phones and looking for certain amounts of evidence. And so what you see is a much bigger scale opportunity because the number of users is exponentially higher than there will be in SLG. So if you think about a DEA agent, maybe a GCHQ agent or MI5 agent, there are many more of them than there will be a lab technician in SLG. So we're tuning our product to take advantage of that. And the buyer is simply the person that's in command of those field agents. It's the equivalent of a Chief of Police. It will be an Intelligence Chief or a Base Chief or an Army Chief will be the actual buyer that we're after.

Maybe just a word about the corporate opportunity.

Yes, I mean, the corporate opportunity. I mean, our enterprise business is growing in line with the enterprise market. We feel that we're making progress. I mean, we have the who's who of accounts that we always say. We had some significant wins out of Fortune 50 customers this quarter. We are optimistic about our partnership with relativity adding to that and also partnerships with other service providers. So the corporate opportunity led by Phil O'Reilly, who's a world-class leader, is really starting to come around, and we're satisfied with our revenue in that area.

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

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

I think when we've given and thank you Eric for the question, we've given this vision and to the $1 billion it was relying on a few factors that we are actually seeing being executed and as you said it's built on CAGR. So last year we've done better than that. This year current guidance alluded that we are slightly below but doesn't mean that we are getting away from our overall performance expected. What we are seeing this year that impacting both revenue and ARR is actually what we said before on the spending time, especially with the federal government, and we believe that this will be released, and we will see 2026 catching up on what we are missing here. And I think what Marcus spoke before about the World Cup will provide us more opportunities that are currently not captured in our 2025 forecast. Altogether, we are not changing our trajectory to get to a $1 billion company.

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

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

Thank you.

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

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

Thank you. This concludes today's Cellebrite First Quarter 2025 financial results conference call. Please disconnect your line at this time and have a wonderful day.