Earnings Call Transcript - CLBT Q2 2023

Operator, Operator

Welcome to Cellebrite's Second Quarter 2023 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, Ashley, and welcome everybody to Cellebrite's second quarter 2023 financial results call. Joining me today are Yossi Carmil, Cellebrite's CEO; and Dana Gerner, Cellebrite's CFO. There is 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 are 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. Let's start with 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 financial information for the second quarter of 2023, the first quarter of 2023, and each quarter of 2022 and 2021 are available on the Investor Relations website at investors.cellebrite.com. Also, unless otherwise stated, our second quarter 2023 financial metrics as well as the financial metrics provided in our outlook that will be discussed on today's conference call will be on a non-GAAP basis only, all historical comparisons are over the second quarter of 2022 unless otherwise noted. In addition, please note that the statements made during this call that are not statements of historical facts 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 the actual results to differ materially from historical results and/or from forecasts. Some of these forward-looking statements are discussed under the heading Risk Factors and elsewhere in the Company's annual report on Form 20-F filed with the SEC on April 27, 2023. The Company does not undertake to update any forward-looking statements to reflect future events or circumstances. Slide number 3 provides the agenda for today's call. And as you will hear, we delivered very strong Q2 financial performance, made important strategic progress, and have increased our full-year 2023 financial expectations. With that background, I'd like to turn the call over now to Yossi Carmil, Cellebrite's CEO.

Yossi Carmil, CEO

Thank you, Andy, and thank you all for joining us today. I'm excited to discuss our second quarter results which highlight our continued success in delivering the industry's leading digital intelligence software suite to public and private sector customers around the globe. As illustrated on Slide number 4, we delivered an excellent second quarter performance on all fronts. We reported strong financial results while making strategic progress in several areas which are critical to our long-term success. Our Q2 financial performance was highlighted by the following KPIs: Total revenue of $76.7 million, driven by subscription software revenue growth of 35%. ARR grew 28% to $274 million. Dollar-based net revenue retention was 125%, which was our 18th straight quarter above 120%. We closed 25 large deals each valued at over $0.5 million, adjusted EBITDA of $11.1 million or 14.5% on a margin basis, and non-GAAP EPS of $0.05. Lastly, we ended Q2 with cash and investments totaling nearly $245 million, up $23 million from Q1. Now with a strong first half of '23 behind us, we now move into the seasonally stronger second half of the year in a healthy market. As a result, we have increased our financial outlook for the year. Turning to Slide 5, Cellebrite's customer relationship remains strong in Q2. Our ongoing investment in powerful customer-driven innovation and go-to-market activities enables us to continue winning in the market. Our second quarter 2023 revenue growth demonstrates our ongoing success in extending the scope of our relationship within the digital forensic units of our customers and our progress in extending our reach into their investigative units. In addition to strong public sector expansion, we delivered our second straight quarter of high-teens revenue growth in the private sector. Geographically, our Q2 revenue and ARR growth were powered by the Americas and EMEA. In terms of our large deals, the average size of our second quarter 2023 large deals grew 16% over last year even though the number of the deals was slightly below the same period last year. Importantly, more than half of our large deals included Premium and approximately 40% included either Pathfinder, our investigative analytics tool, or Guardian, our evidence management solution, or both. So overall, the spending environment on digital intelligence solutions remains robust. Around the globe, public safety is challenged by rising crime rates, increasingly sophisticated criminals, the proliferation of digital evidence across a wide range of smartphones and other devices, limited manpower in increasingly strained police departments and heightened interest around police operations and priorities. To close this gap in public safety, law enforcement agencies around the globe continue to invest in digital intelligence solutions that will help modernize their investigative workflow to successfully advance and close cases, keep the community safe, and meet other important KPIs. As a result, we continue to see favorable budget tailwinds in the USA, Western Europe, Latin America, and key parts of the Asia-Pacific region with more customers in the public sector allocating more money for Cellebrite Solutions than they did last year. In addition to our strong Q2 performance, Cellebrite made important strategic progress over the past several months. In June, we announced our plans to introduce UFED Ultra, a revolutionary next generation Collect and Review solution that enables digital forensic units to lawfully access and extract digital evidence from the broadest range of mobile phones. UFED Ultra is designed to deliver greater ease of use, simplified workflows, and full file system extraction for even the most advanced smartphones, a capability that was previously only available in our Premium solution. Just as importantly, we've continued to see great uptake of our premium suite of solutions, which provides full access to the most advanced smartphones on the market and still has significant room for adoption across our installed UFED license base. Leadership in this sector is anchored by differentiated technological capabilities that remain unmatched across both iPhone iOS and Android. Given these dynamics, we see substantial multi-year opportunity to upgrade and upsell our Collect and Review solution. We are also taking important steps to enhance Guardian, our case and Evidence Management workflow solution. We recently announced new features and functionalities for Guardian that make it easier and more efficient for examiners to share digital evidence with their investigators. Now, I will highlight a couple of great second quarter Guardian wins in a moment. Between Guardian and our Premium as a Service offering, we are just starting to scratch the surface of the revenue potential of cloud-based digital intelligence solutions. We are accelerating our plans to build out our technical infrastructure and support the delivery of more high-value cloud-based solutions. The second quarter was also marked by continued adoption of Pathfinder, our artificial intelligence-powered investigative analytics solution. We are on track to significantly expand our Pathfinder customer base this year and drive faster ARR growth. We believe that the investigative units represent Cellebrite's second primary growth engine augmenting our growth in digital forensic units. Accordingly, we are mobilizing our R&D, sales, and marketing resources to ensure that we effectively and efficiently capitalize on this opportunity. On the R&D front, it's important to recognize that our investment in artificial intelligence benefits more than just our Pathfinder investigative analytics. In Collect and Review, we have continued to strengthen our market-leading Physical Analyzer platform with advanced machine learning capabilities, which makes it easier and faster for digital forensic units to identify relevant evidence within the vast volume of digital data across the broadest range of digital devices, applications, and warrant returns. In conjunction with reporting our results today, we also announced the appointment of Tom Hogan as Cellebrite's Executive Chairman. We believe that this action enhances our corporate governance and supports Cellebrite as it moves into the next chapter of growth and market impact as a global digital intelligence leader. Tom is an experienced veteran with a proven track record of success, including his most recent work at Vista Equity. I look forward to his counsel and support as we work together with the board and the broader Cellebrite team to help shape and drive our strategy forward, scale up our business in our largest market and drive value creation for our stakeholders. Tom's appointment expands our Board of Directors to 10 members, and we are fortunate that the Company's former chairman, Haim Shani of Israeli Growth Partners, a longstanding Cellebrite shareholder, will continue serving as a Director on our board. Moving to Slide 6, I would like to review several second quarter deals which help illustrate some of the key drivers of our success. As noted earlier, adoption of premium by existing customers is steadily increasing. This quarter we had a major expansion of our premium footprint ahead of schedule with a large North American federal law enforcement agency, along with an initial Pathfinder engagement to accelerate time to resolution on critical cases. Cellebrite's Digital Intelligence Solutions is expected to help this customer centralize its critical digital forensic capabilities at scale and supercharge its investigative capabilities. As a result, our ARR for this account will nearly triple to approximately $5 million. In terms of new logos, we brought on a meaningful new customer in the Asia-Pacific region that is expected to deliver nearly $250,000 in ARR. This regional correctional service agency is deploying UFED Premium as a Service and Pathfinder as part of its efforts to build its own digital forensic unit to support strong investigative capabilities rather than outsource these activities to other agencies. I would also like to highlight two deals for Guardian that illustrate our success in leveraging our strengths in digital forensic units to extend our reach into new buying centers. In one deal, the combined purchase of Guardian and Premium as a Service is expected to increase Cellebrite's ARR at this police department by a factor of $10,000 to over $200,000. In the other deal, ARR for the city's DA office will more than double to $330,000. Finally, in the private sector, our intensified sales focus on larger, more strategic accounts is yielding tangible results. In Q2, a U.S. service provider expanded its use of Endpoint Inspector for more digital data collection from mobile phones, computers, and cloud applications as part of its forensic practice. This supports its corporate client's legal, regulatory, and compliance activities. ARR from this service provider will nearly double into the low six-figure range. Let's move to Slide 7 and update on our outlook. As we look ahead, we believe that we are well positioned to continue helping law enforcement agencies convert the following three major pain points into advantages. First, the complexity and volume of digital data involved in today's crimes is rapidly increasing. Second, inefficient workflows are limiting the speed of investigations and contributing to a growing backlog of devices. Third, there is a greater public scrutiny on the ethics and accountability of law enforcement operations. Based on our results to date, the trajectory of our business into the second half of this year, and favorable market conditions, we have raised our annual 2023 guidance. Our updated revenue and ARR targets primarily reflect our ongoing success in gaining more wallet share with existing customers. As I have discussed, demand for our Collect and Review solutions remains strong, and this is augmented by attractive prospects to drive adoption for our investigative analytics and evidence management offering. We expect that the combination of our revenue growth and disciplined spending will enable us to deliver a major improvement in our adjusted EBITDA over last year, along with strong cash generation in 2023. Dana will share additional details on our updated guidance shortly. While there is still a lot of hard work ahead, 2023 is shaping up to be a very good year for Cellebrite; it is an exciting time for Cellebrite. The opportunities in front of us are substantial in size and global in scope. Our team is focused on fulfilling our mission to deliver powerful digital intelligence solutions that help our customers modernize their workflows in support of protecting and saving lives, accelerating justice, and ensuring data privacy. By executing on our second half plans, we believe we'll stay on track to achieve our updated expectations for 2023, sustain our momentum in 2024, and keep Cellebrite well-positioned for creating shareholder value over the long term. With that, I will turn the call over to Dana for her financial review.

Dana Gerner, CFO

Thank you, Yossi. Let's begin our review on Slide 9. We reported second quarter revenue of $76.7 million, an increase of 23% against a relatively muted second quarter of '22. Strong 35% growth in subscription revenue was offset by declines in both other non-recurring revenue and professional services. Geographically, revenue growth was led by EMEA at 33%, followed by the Americas at 23%. As detailed on the slide, 88% of our total quarterly revenue came from software subscriptions versus 80% one year ago. We expect that subscription revenue will represent 85% or more of our total revenue for the foreseeable future. Slide 10 details our ARR goals, which are an important forward-looking KPI for Cellebrite's sales momentum and the trajectory of future revenue. As Yossi noted, our ARR grew 28% year-on-year to $274 million at the end of Q2. This was primarily due to the successful expansion of our existing customer relationships. Within this category, more than 80% of the customer expansion growth came from our Collect and Review solutions. The contribution to existing customer ARR from our investigative analytics and evidence management solutions has more than doubled from one year ago. As you likely noticed, our subscriptions revenue growth of 35% outpaced our ARR growth, which is counter to the historical trend of subscription revenue modestly lagging ARR growth. This is primarily due to two factors. First, about two-thirds of the difference was tied to the linearity of Q2 sales. In 2022, approximately half of our Q2 sales were closed at the end of the quarter when the majority of this year's Q2 deals were closed during the first two months of the quarter. The balance of the difference is associated with certain large customers who transitioned from maintenance agreements to subscription licenses during the second quarter of 2023. Slide 11 details the historical trends for our non-GAAP gross margins and non-GAAP operating expenses, which exclude share-based compensation, amortization of intangible assets, and acquisition-related expenses. Our second quarter '23 gross margins of 83.6% improved 400 basis points from 79.6%, due primarily to the growth in our higher margin software offerings. In terms of operating expenses, second quarter operating expenses were $54.7 million—an 8% increase from the prior year—primarily due to higher personnel costs and the impact of certain one-time projects on our G&A expenses. With that said, our second quarter spending benefited from prudent expense management, the timing and place of hiring activities, and favorable changes in foreign exchange rates tied to the Israeli shekel. We ended June with 966 employees, which is unchanged from a year ago. As a reminder, our objective in '23 is to keep total headcount relatively flat with the year-end of 2022 levels. Turning to Slide 12, the combination of higher revenue and prudent spending resulted in adjusted EBITDA in the quarter of $11.1 million or 14.5% on a margin basis. This is a major improvement over the same quarter last year, and it exceeded our claims entering this quarter. Our Q2 non-GAAP operating income was $9.4 million with non-GAAP net income of $10.7 million or $0.05 on a fully diluted basis. We had a very good quarter of cash generation producing $16.6 million in cash from operations. We finished the first quarter with $244.6 million in cash, cash equivalents, and investments, up $23.4 million from the end of the first quarter. Now, let's move to Slide 13. As detailed in our press release and as Yossi highlighted, we've raised our financial '23 targets. Cellebrite's original and updated guidance is displayed on this slide. We have increased our revenue outlook for 2023. In doing so, we raised the midpoint of our updated '23 revenue range by $5 million. We anticipate strong subscription revenue growth in the second half of this year, partially offset by more muted professional services and other revenue. Historically, we generate the majority of our revenue in the second half of any given year, and we expect this trend to hold true in 2023 with 53% to 54% of full-year revenue anticipated over the next two quarters. We have also increased our ARR target range for the year. Our current view and anticipated year-end reflect a relatively consistent level of ARR expansion in absolute dollars from Q2 to Q3 and from Q3 to Q4. Geographically, the Americas and EMEA regions have been standout performers, and we expect that trend to continue. As we look ahead, we expect that our December ARR growth will largely come from expansion within existing customers, which we anticipate will continue to be fueled by our Collect and Review solutions, with growing contributions from both Guardian and Pathfinder in the second half of this year. From a profitability standpoint, we have raised the range for adjusted EBITDA and adjusted EBITDA margins. Even as we plan to continue funding important investments that will help us innovate, build strong customer relationships, and further scale our organization. We move into the second half of our year with a strong financial foundation that we expect will be fortified with solid cash inflows from operations over the coming quarters. This provides us with sufficient fiscal flexibility to reinvest in our business and carefully evaluate opportunities such as potential M&A, partnerships, and alliances that can help us accelerate innovation around our current product portfolio. In closing, as Cellebrite approaches the second anniversary of becoming a public company later this month, we are hitting our stride. Our strong Q2 results and attractive prospects for profitable growth in the second half of this year have enabled us to increase our '23 guidance. We are excited about our strategic direction and the opportunities we see to sustain our momentum, fortify our leadership, and continue making a real difference in public safety.

Operator, Operator

Operator, that concludes our prepared remarks and we're now ready for Q&A.

Operator, Operator

Our first question will come from Jeff Van Rhee with Craig Hallum. Please go ahead.

Jeff Van Rhee, Analyst

A number of questions for me. First, maybe just start on Guardian and Pathfinder, you called out some pretty good momentum there. I wonder if you could spend a minute more talking about the sales motion and what you've figured out with respect to the appropriate buyer process, just how you feel about that motion? What still needs to be improved?

Yossi Carmil, CEO

Maybe I will take it to start. First of all, Guardian is an important solution designed to help digital forensic units and investigative units modernize the flow and contribute to scalability functionality, which is around case management and evidence management. Now at this stage, Guardian was launched last year, practically in 2022. We are pretty much in a starting phase. There are several dozen Guardian customers and hundreds of users at the moment. We plan to take important steps over the coming quarters to continue driving adoption of this platform into our install base. There is a clear need for more education efforts around customer success, and the sales cycle here is a bit longer. When it comes to Pathfinder, we are very pleased at this stage with our position. It's definitely an important solution that appeals not only to digital forensic units but also to investigative units. As I said, we believe that this is the second growth engine of Cellebrite, side by side with the digital forensic units. We have closed dozens of Pathfinder deals over the last 12 months and cross-sell and upsell this offering. We are quite satisfied with where we stand right now. We just need to continue to do the work we're doing.

Jeff Van Rhee, Analyst

And then if you could just share your thoughts on the pipeline. What are you seeing in the pipeline? Anything that stands out, both pros and cons? Are there any geographic variances, large versus midsize versus small trends, product updates, the competitive landscape—any insights you can provide?

Yossi Carmil, CEO

The pipeline of the Company is healthy, and I would say it's healthy across segments. If I look at the federal in the United States or Americas on our state and local government, both in America and in EMEA, I basically see a very good picture in terms of the pipeline as we look ahead. One can also note that our sales team, especially our sales operation, not only that we have a healthy pipeline, we were able in Q2 to bring deals quicker and manage very well the normal tendency of lumpiness in large deals, and we are very satisfied in that respect. Also, the sales cycle, if I look at it, remains consistent across all geographies and all segments. When it comes to Collect and Review, we've been successfully closing deals in just a few weeks to one quarter. For Pathfinder and Guardian, we have a good pipeline, but the sales cycle is longer, taking between six to 18 months, but overall, it's a good picture.

Jeff Van Rhee, Analyst

And one last question on the M&A front. I know there are a lot of incremental capabilities that would make sense within the suite. Can you provide some insight on the urgency, the depth, and breadth of the pipeline, what we should expect over the next three to six months?

Yossi Carmil, CEO

Regarding M&A, first of all, organically we have a very clear plan and I think we are clear about that. When it comes to M&A, it is part of our strategy and we are looking for alternatives. We have some currently on the radar that have to fit in terms of our needs. I can say that we are looking at opportunities which are in the mix of small technological advancements, which will be suitable for our current portfolio and enable us to better fulfill our existing plan. Side by side, we are also looking for larger opportunities which will scale us up in adjacent areas. Specifically in the private sector, we are exploring several opportunities that will expand our capabilities beyond collection and eDiscovery where we currently stand.

Operator, Operator

Thank you. We'll take our next question from Jamie Shelton with Deutsche Bank. Please go ahead.

Jamie Shelton, Analyst

Just a couple of housekeeping questions from me. Can you provide what percent of the UFED base is now connected to premium as of fiscal Q2, and then I've got one or two follow ups. Thanks.

Dana Gerner, CFO

We are expanding our premium offering within our existing base. We've moved from the low-teens to close to mid-teens. Last quarter we increased and passed the mid-teens this quarter. It's an ongoing effort and continuous penetration.

Jamie Shelton, Analyst

I'm probably nitpicking here, but I saw the net dollar retention tick down a few percentage points sequentially. Is there any additional color you can provide, and how should we expect that to trend from here?

Dana Gerner, CFO

The net dollar retention rate is actually following our ARR trend, which we mentioned will converge in the midterm with revenue. Our revenue guidance is approximately 20%, so we expect ARR to get closer to net dollar retention, slightly below, if we acquire more customers.

Jamie Shelton, Analyst

Many of your cybersecurity public peers are talking about the application of generative AI within their product set. What is your view on the potential application of large language models within your portfolio?

Yossi Carmil, CEO

The question was related to AI, specifically generative AI?

Jamie Shelton, Analyst

Specifically, generative AI and the use of large language models on your dataset.

Yossi Carmil, CEO

We continue to invest in enhancing AI capabilities, both in Physical Analyzer and in Pathfinder solutions. It is important for investigators because it helps automate time-consuming tasks and makes investigations, in our view and that of our customers, more efficient. We believe that AI will play an increasingly important role in digital investigations over the coming years. We are investing in each of our products—Physical Analyzers as part of Collect and Review and Pathfinder in several areas. Thus far, our investment has primarily focused on developing our own machine learning models, and we will continue to explore open source-based AI models that we can implement within our capabilities. I hope this is helpful.

Operator, Operator

Thank you. We'll take our next question from Tal Liani with Bank of America. Please go ahead.

Tomer Zilberman, Analyst

Hey guys, thank you for the question. This is Tomer Zilberman on for Tal. Two questions from me. The first question, just wanted to close in on something you mentioned during your prepared remarks. You said that the ARR growth this year was supported by customer expansion, with more than 80% from Collect & Review. You also mentioned you're expecting significant expansion within Pathfinder for ARR growth. What do you expect the impact of analytics and management to be on ARR list growth? Additionally, what are your expectations for revenue breakouts within your different product lines?

Dana Gerner, CFO

We currently do not provide detailed information for each and every product offering. We just provide general guidance. As the base of both Pathfinder and Guardian is substantially larger than the growth base for Collect and Review, we expect their percentage growth to contribute more than Collect and Review. However, from a dollar perspective, the majority will still come from Collect and Review, both in ARR and revenue growth.

Tomer Zilberman, Analyst

As a follow-up on regional trends, you saw growth accelerate in America and EMEA, but I think you actually saw some slowdown in APAC. So, any color you're seeing across the three regions?

Yossi Carmil, CEO

First of all, I would say that we believe that the APAC region has significant growth potential. We also informed recently about the appointment of a new regional leader, and we plan to continue upgrading the regional sales leadership in that area. I can say that we continue to see favorable budget tailwinds when it comes to specific sub-regions like Australia, New Zealand, Japan, and Singapore. We believe we are just starting to scratch the surface there. While in Q2 revenue grew just 2%, it trended favorably compared to Q1 results, and ARR in APAC grew solidly 22%, aligning with our plan. So, we are pleased with our market position and pipeline in some of the larger markets, and while it'll take time to make relevant changes, we are positive and confident about improving as we progress through the year.

Tomer Zilberman, Analyst

If I can sneak in one last question, I appreciate the commentary on UFED Ultra. Any initial customer conversations that give you confidence on the growth potential here? What is your customer target versus just selling normal UFED along with premium?

Yossi Carmil, CEO

The short answer is it’s too early because we announced our plans to introduce UFED Ultra in June, and we plan for UFED Ultra to deliver ease of use and simplified workflow. We are adding full file system access, which was previously only part of the premium. Our current plan is to begin sales and marketing activities supporting UFED Ultra before the end of 2023. Specific timing and general availability will be shared with our customers. We believe this functionality will offer significant value, and it represents a significant upgrade opportunity for thousands of existing customers, as there are over 30,000 currently. This presents an amazing business opportunity and an amazing improvement in customer operations.

Operator, Operator

We will take our next question from Louie DiPalma with William Blair. Please go ahead.

Louie DiPalma, Analyst

When Premium customers add Pathfinder to their suite, on average, how much does ARR increase?

Dana Gerner, CFO

Well, it varies based on the size of the Pathfinder that they will choose and the size of the customer. It can start with a few ten thousands of dollars and ramp up to hundreds of thousands and even more.

Louie DiPalma, Analyst

That seems like a big catalyst for the increase in large deal sizes. My next question—are we under the impression that there were price increases that were implemented following the Grayshift and Magnet merger? Have you seen those price increases in the market, and have they positively benefited Cellebrite?

Dana Gerner, CFO

We've heard from customers that they have faced substantial price increase requirements from Magnet and Grayshift throughout the year. Yossi, perhaps you could provide more color.

Yossi Carmil, CEO

Indeed, both Magnet and Grayshift implemented fairly large price increases during the first half of the year. It wasn't well received by customers. We chose at this stage to implement a rather modest increase, which has been well received by customers. Let's not forget that in the public sector, customers work within fixed budgets, and they need to ensure relevant adoption.

Louie DiPalma, Analyst

Are you still the only software provider that can unlock the iPhone 14 or have competitors caught up on that front?

Yossi Carmil, CEO

At the moment, when it comes to the latest operating systems, we have unmatched capabilities with respect to anything else that exists in the market.

Operator, Operator

And we will take our next question from Mike Cikos with Needham and Company. Please go ahead.

Mike Cikos, Analyst

Thanks for getting me on the call here. I appreciate the guidance walk-up that we're receiving today. I'd like to ask about hiring, specifically the trade-offs you're making when considering your hiring trends at Cellebrite. As growth moves higher along with EBITDA margins, what gives you confidence that you are adding talent appropriately to support the durable growth story at Cellebrite?

Yossi Carmil, CEO

If we're looking into the future, we have exciting challenges around continuous investment in best-of-breed collection to stay ahead. We have a clear path for maintaining and successfully hiring additional talent in that respect. Regarding Evidence Management, and moving towards a cloud offering, which relates to Guardian and Premium as a Service, we are successfully building the right teams and have done a good job hiring the talent we need to combine on-prem and cloud elements in the future. In the go-to-market team, we need to invest in a good mix between product sellers and solution-focused, value-added sellers, especially in customer success, as these roles are crucial for effective implementation, cross-sell and up-sell solutions like Pathfinder and Guardian. We have a clear plan on what we need to recruit, and we're also very successful in achieving those goals.

Mike Cikos, Analyst

That's great. You're actually starting to feed into where I wanted to take this. More specifically about hiring for the go-to-market team: can you help us understand the average tenure of the sales force? Are new reps ramping at a similar rate, or is there potential acceleration in ramping time? I'm trying to gauge the execution of the sales force given recent performance.

Yossi Carmil, CEO

First of all, I want to emphasize that our sales machine is working. If you recall last year, there were discussions about staff turnover and fluctuations; however, in Q2 and H1, we've brought things in quicker. The onboarding process remains unchanged. For product sales, we see a quick onboarding process, while solution sellers typically take about two quarters. We are well-equipped and positioned, keeping an eye on talented individuals as we do not wait for challenges to arise.

Operator, Operator

This concludes today's call. I would now like to turn the floor over to Cellebrite's CEO, Yossi Carmil, for additional closing remarks. Please go ahead.

Yossi Carmil, CEO

Thank you. First of all, thank you all for joining. As I said at the end of my pitch, we are in a very good momentum. There is a lot of hard work to do, but we have increased our guidance, and we are confident about our ability to grow and continue executing our strategy. I thank you for joining and for your trust. Have a great day.

Operator, Operator

Thank you. This concludes today's Cellebrite second quarter 2023 financial results conference call. Please disconnect your line at this time and have a wonderful day.