Earnings Call Transcript - CLBT Q4 2025

Operator, Operator

Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please standby, your meeting is about to begin. Welcome to the Cellebrite DI Ltd. Fourth Quarter and Full Year 2025 Financial Results Conference Call. At this time, participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. Press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you pick up your handset for the best sound quality.

Andrew Kramer, Moderator

Thank you very much, operator. And welcome, everybody to Cellebrite DI Ltd.'s Fourth Quarter and Full Year 2025 Financial Results Conference Call. I'm joined today in Israel by our primary speakers, Thomas E. Hogan, Cellebrite DI Ltd.'s CEO, and David Barter, Cellebrite DI Ltd.'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 web at investors.cellebrite.com. In addition to the press release, we publish 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 publish 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 financials 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 03/18/2025. 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.

Thomas E. Hogan, CEO

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 insights 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. Grew ARR by 21% in 2025, which factored the combination of a four-point headwind from our US federal unit's actual performance versus our original plan, and a nearly four-point tailwind associated with the close of Keryllium. 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 accomplishments that position us for accelerated growth in 2026. First, we've now converted 55% of our installed digital forensics space to Insights 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 extend our leadership in Android and we'll reassert our leadership in iOS. We expect this range of leadership capabilities will hit the market over the coming six weeks and position Cellebrite DI Ltd. 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 Keryllium, in early December while we continued our work to gain final clearance from CFIUS. Keryllium's ARM virtualization technology remains an industry-unique and powerful asset. Customer interests 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 announce the transaction in June. 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 2025. We see several levers for further acceleration as our portfolio and solutions evolve over the coming quarters. We choose 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 remains strong. Macro tailwinds around crime, population growth, and 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 US federal segment are thankfully now behind us. Excuse me. 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, an increase in focused federal funding, and the final DOJ sponsored authorization to operate for FedRAMP level four which we expect to obtain before the end of this quarter after a lengthy eighteen plus month process. Federal ATO will pave the way for Guardian and our cloud assets in the US federal market. Augmenting these growth engines is our increased focus on more targeted defense and intelligence solutions, as well as the product fit of Keryllium and DNI. 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 insights conversions, the value proposition of our insights 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, 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 twenty plus percent annually, and surpass $53 billion by 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 US 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 nation's 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 location 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 Keryllium, we transitioned this year from a reseller to a fully integrated selling motion. We're driving elevated education and training across the Cellebrite DI Ltd. go-to-market team and customer base and see meaningful growth opportunity across both the public and private sectors. Keryllium 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 2.5 times 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 US 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 this is a harbinger for accelerated deployment and growth in '26. Pathfinder, our flagship analytics solution for multi-phone forensics, continues to deliver important levels of insight and productivity to a growing percentage of our Insights installed base. 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 see AI as an absolute tailwind across three 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 DI Ltd. 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 see it as a force multiplier from both the business and societal impact. Cellebrite DI Ltd.'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 gives 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. Finally, Cellebrite DI Ltd.'s history is grounded in 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 2025. We navigated turbulence in the US federal space while still delivering healthy growth in both the top and bottom line. Just as importantly, 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. Proud of our impact in the world, and we're anxious for the future. With that, I'll turn the call over to Dave. He'll do a click down on the details and add further insight to our first quarter and full-year guide. Dave?

David Barter, CFO

Thanks, Tom. I'd like to briefly share highlights from the fourth quarter and full year. ARR grew 21% to $481 million which includes Keryllium. We closed the acquisition on December 1, with Keryllium's ARR at $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 three 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 2026. 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 US 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 Keryllium 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 Keryllium 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 three hundred forty 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 US 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 Keryllium in December. Free cash flow for the fourth quarter was $82.3 million. For the full year, 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 benefit from AI. We are of the view that 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. We were very deliberate about not changing Cellebrite DI Ltd.'s guidance framework when I joined the company midway through 2025. We have modified our guidance philosophy. 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 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. 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, insights through conversions, more pervasive deployments, and ups 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. Keryllium, 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. 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 demonstrates not only sequential stability but an expansion motion in terms of absolute dollars versus the comparable quarters one year ago. We expect first quarter revenue in the range of $127 million to $129 million, an increase of 18% to 20% 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. 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 two transitory headwinds that weigh on margins. The first item reflects the absorption of incremental Keryllium 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 US 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 free cash flow margins in excess of 30%. Finally, I'd like to offer a thought on Cellebrite DI Ltd.'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 free cash flow 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 forties and an objective to drive performance to 50 plus. Overall, the team delivered a successful 2025 despite the transitory headwinds in the US 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. I 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 and A.

Operator, Operator

Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Bhavin Shah with Deutsche Bank. Your line is open. Please go ahead.

Bhavin Shah, Analyst

Congrats on solid year and a strong '26 guide. Maybe first on the acquisitions. I mean, kind of announced SCG Canada expecting to close kind of two deals in quick succession. 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? Feel like you have to make any internal changes as you fold these companies in, and how do you guys think about allocating resources amongst the core relative to Keryllium and SCG?

Thomas E. Hogan, CEO

This is Tom. I'll take it. So first, you know, the Keryllium transaction took longer to close than we anticipated. The good news with that is we've now had, you know, essentially seven 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. From an executional challenge perspective, there was pretty good spacing between the two deals. The second thing that I probably anticipate the question that somebody's gonna ask is, you know, how big is the breadbasket with the SCG deal? They're currently a small operation, but we're super excited about it because just the drone world is, as I said, is exploding and having market-leading drone forensic capability is hugely compelling. So we think the growth trajectory of that business is also gonna be huge.

Bhavin Shah, Analyst

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 how did this kind of come about in terms of looking at the asset? Was this something that customers are asking for? And or is this something that, as you look two to three years, five years down the pipe, this is something that's gonna be more meaningful? Like, what are your thoughts?

Thomas E. Hogan, CEO

Yeah. So good news is the answer is both. In particular, in the short run, and Marcus might comment on this, but in the defense and intelligence world, they are already using the technology. The demand from our mutual customers is loud and clear. And when we do strategic planning, one of the things we would expect from us is to always look out, kind of skate to where the puck's going from a TAM perspective. Are there adjacent markets that bring big TAM to the Cellebrite DI Ltd. value proposition? The moves we're making in investigative analytics now combined with drones will enhance our market position significantly.

Marcus Jewell, CRO

I'll add to Tom's comment there as well. Yes, there is already customer demand. We are deploying solutions that take data from sensors. The biggest sensor out there is a cell phone, but a drone 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 trading for those solutions.

Operator, Operator

Thank you. Our next question comes from Jonathan Ho with William Blair. Please go ahead.

Jonathan Ho, Analyst

Hi, good morning, and 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?

Thomas E. Hogan, CEO

Yeah. So Jonathan, the investments were basically doubling down with our internal research team to both extend our leadership in Android and to ensure that we maintain our leadership across both major OSs, Android and iOS. The goal is to offer a clear leadership position across the board. The investments were made in our internal research team to achieve this in conjunction with several external partnerships, which has been our standard operating procedure for the last fifteen plus years.

Jonathan Ho, Analyst

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 the malaise that we saw last year? And what gives you the confidence that this can return to a stronger growth rate?

Thomas E. Hogan, CEO

Yeah. I covered the macro categories, but I'll let Marcus give you maybe a better answer. He can provide empirical data behind our enthusiasm.

Marcus Jewell, CRO

Yeah. It’s been, as we said over the last six months. What we're seeing is reminding everybody of the use cases. There are obviously the defense and intelligence use cases, which the world continues to see more threats. Data collection in new situations is incredibly important. We're seeing those use cases build out, and the confidence is building around them on both local and national levels. You saw that strength in our EMEA results as well. Border security is a big area with significant investment globally. There are also some external events, like the FIFA World Cup coming to the U.S., which will create potential for serious crime and the need for enhanced security. We are used in those deployment areas. These agencies are working under a two-year budget, allowing them to plan more strategically, and they feel comfortable with our competitiveness and product offerings. Lastly, the ATO for our Guardian solution puts us in a unique position to store and share forensic data under the FedRAMP approval, opening significant opportunities for us to capitalize on.

Operator, Operator

Thank you. Our next question comes from Shaul Eyal with TD Cowen. Your line is open. Please go ahead.

Shaul Eyal, Analyst

Thank you. Good afternoon, everybody. Congrats on solid 2025 completion. Tom, maybe just for clarification, I've been getting some emails 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? And maybe any headcount number you can provide us with as it relates to this acquisition? And I have a follow-up.

Thomas E. Hogan, CEO

Yep. Okay. Good question. So let me clarify: we're inheriting a low single-digit ARR run rate. Price paid is in the $15 to $20 million range, and we expect the ARR growth potential for that business to exceed that figure. We moved quickly to assert ourselves as a first mover in drone forensics.

Shaul Eyal, Analyst

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

David Barter, CFO

Great question. Thank you. I would actually model the top-line perspective pretty close to twenty April terms of that split, which was largely a little less than 40% in the first half and 60% in the second.

Operator, Operator

Thank you. Our next question comes from Jeffrey Van Rhee with Craig Hallum. Your line is open. Please go ahead.

Jeffrey Van Rhee, Analyst

Great. Thanks for taking the questions. Congrats on that free cash flow margin in particular. Tom, can you talk a bit more about these opportunities, specifically about the agentic applications regarding cybercrime, child exploitation, etc? Just talk more about what those would be and how you monetize them.

Thomas E. Hogan, CEO

Yeah. We're tracking our efforts in AI with parallel initiatives across our core product team to integrate AI capabilities that drive productivity. So think of features like media classification, summarization of text chats, and report generation. This will elevate our user base's productivity. Concurrently, we have an AI innovation center developing more specific agentic applications based on feedback from design partners, which have shown increasing enthusiasm for deployment. We are currently evaluating how to monetize these applications, and the guidance assumes we don't monetize any of that in '26.

Marcus Jewell, CRO

Indeed. Yeah. Let me break that down. In public safety, our coverage, even in small and medium agencies in the US, can increase, so we're extending our presence there. We've seen a real uptick for our mobile app penetration testing solutions, especially in financial services as banks run multiple apps that need to be checked for safety. And we're watching how we build out our DNI which requires a different approach into specific touchpoints.

Operator, Operator

Thank you. Our next question comes from Brian Essex with JPMorgan. Your line is open. Please go ahead.

Brian Essex, Analyst

Great. Thank you for taking the question. And congrats on the results. Great to see the stabilization, particularly in the Fed. Maybe, Dan, if I could have you unpack a little bit of the commentary you had on the guidance, particularly regarding the prudence of guidance and the tighter ranges around ARR for your targets. Could you help us understand the philosophy that the company had over the past few years and how that's changed to have tighter guidance?

David Barter, CFO

It's a great question, thank you. I think if you were to rewind and compare our guidance spread last year, we had a $15 million spread on ARR versus our current $6 million spread. We've seen a strong degree of forecast accuracy and relied heavily on our customer base and renewal patterns, and that informs our modeling. So we aimed to narrow the ranges to improve visibility and precision in our guidance.

Brian Essex, Analyst

Got it. Very helpful. Thank you so much.

Operator, Operator

Thank you. Our next question comes from Eric Martinuzzi with Lake Street. Please go ahead.

Eric Martinuzzi, Analyst

Yes, Tom, I wanted to dive a layer deeper on your comments regarding AI. Curious to know, in your conversations with customers, are they pulling you in a direction for enhancements made in your platform? Are they just seeing value in what you offer or requesting new features?

Thomas E. Hogan, CEO

The good news is everybody's tinkering and learning. The early adopters are discovering significant gaps that we're able to fill with what we're producing, and instead of refocusing their requests towards us, they are aligning with our capabilities and adopting our offerings. We are leveraging AI significantly through the Keryllium asset to identify vulnerabilities and exploits.

Operator, Operator

Thank you. Does anyone have any additional questions? 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.

Andrew Kramer, Moderator

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.

Operator, Operator

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