From Devices to Intelligence: Cellebrite's Growth Story

Speaker 1:
Welcome to TV Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Shaul Eyal:
Thank you. Good morning. It is our pleasure to host the management of Cellebrite. We have the CFO, Dave Barter. We have Andy Kramer, VP of IR. Gentlemen, thank you so much for joining us this morning.
David Barter:
Well, thank you so much for having us. We're so excited to be here with you.
Shaul Eyal:
Maybe just for the audience slightly less familiar with a Cellebrite story, can you outline to us what is it that you actually do for a living?
David Barter:
We have the incredible pleasure of actually focusing all of our time and energy on public safety. We care about nations. We care about communities. We care about all of those wonderful people that make up every community, whether it's the schools, the businesses. Our goal is to just make life safe. And so our focus is partnering with law enforcement at a local level, at a national level, to make sure that we ultimately make communities as safe as they possibly can be.
Shaul Eyal:
And as we think of some of the drivers propelling the Cellebrite thesis and theme ahead, what would those be?
David Barter:
Well, if you were to rewind the clock on society and you kind of think about what's been happening around for thousands of years, but what's different if you think back to maybe the last 15 years is the amount of digital data that is... now goes with crime. And so when I think about what our superpower is in life, it is that ability to take a hardware-based solution, a cloud solution, a solution that can be air gapped, and be able to partner with law enforcement to compress investigative cycle.
I think about it, just to give a little bit more context, there's incredible push to ultimately have intelligence as localized as it can be, and people are trying to compress the investigative cycles. And so whether it's a city or municipality, whether it is somebody who's in customs and borders protecting the edge or the perimeter of a country, or potentially even an operative that is far from home, they are always trying to gather intelligence and ultimately compress that investigative cycle so that they can take thoughtful and timely action.
Shaul Eyal:
One of the topic du jours we have been talking about in our research is that shift to adopt end-to-end platforms. Can you talk about Cellebrite's platform, as it has been nicely expanding over the course of the past few years?
David Barter:
Oh, it's probably the area that we're most excited about because our customers are guiding us there. And so when we think about what we do really, really well, you can start almost at the beginning of an investigative process, whether you have a mobile phone, maybe you have a SIM card, an SD card, maybe you have a computer, maybe you've picked up another device type.
We are... We excel at having a robust hardware solution and a software solution that comes together to be able to extract information. We can decrypt information that has been gone through various levels of encryption. We can decode it, we can take it, and make it actually structured insight. And so that's really, I'd say, the first part of what we do really, really well around being able to help you gather data. And then it's starting to process that data and turn it into case evidence.
And that's where we work with, maybe it's a detective, an investigator, a district attorney, and then we have a variety of analytical and intelligence products. And that's where we ultimately are able to gather case evidence and start to help people, really, again, accelerate that investigative process. And so it's really moving through several tollgates now where we can really change the game for long.
Shaul Eyal:
As we think about results that you've guys reported two weeks ago, solid set of results, reaffirmation of 2026 objectives and guidance, can you maybe outline to us how you see 2026 unfolding as we shift into the second quarter and into the second half of the year?
David Barter:
It's a great question. I think what we were excited about is we went through Q1, and I think we had signaled this even last year, and we saw growth really accelerating for some structural reasons in the business. One, just a lot of innovation. When I look at our roadmap with our product team, we have nearly 12 major releases that are occurring this year.
So there's a lot of innovation across that platform we just talked about that we're excited about because it's really unblocking our customers in a very fundamental way. So the second area that we really hit on in the earnings call was just this idea that what we're seeing in the area of what we call defense and intelligence, which for some countries this is customs and borders. For others, it's some of the operators they have in the field.
Defense and how countries protect themselves continues to be an area that's being prioritized in terms of just overall budgets and spend. And that's an area that I think we're excited to be able to partner with in terms of compressing that investigative cycle to be able to take a lot of noise and turn it into a really good signal intelligence. So some... those are, I'd say, between product innovation and what we're seeing with our customers, that's really starting to propel the business.
Shaul Eyal:
Generative AI, without a doubt, topic du jour this year, last year, likely to dominate discussion for the next several years. Talk to us about your Genesis AI product that you guys launched less than like two months ago, I would even say. And I [inaudible 00:05:24]-
David Barter:
Oh, we haven't [inaudible 00:05:24] it. That's the great part.
Shaul Eyal:
Yeah. It didn't go GA, but at least introduced it, started kind of letting some customers triage with it a little bit. Talk to us about acceptance levels and what is it that you have been seeing and hearing from customers thus far?
David Barter:
Well, I think we had humble aspirations when we took it out, and we said we're going to have an early adoption phase just to take it to customer design partners and start gathering feedback. We thought it'd be a dozen. It's now hundreds of customers. And so for us, I guess that's the exciting part, where many people have experimented with frontier... excuse me, frontier models, but now we're actually providing a software solution that really is catered to the nature of law enforcement.
And maybe the part that's surprised me the most, as you know, because you're so close to the company, we've been building sovereign clouds for case evidence and to assist governments around the world. Suddenly a sovereign cloud that hasn't been all that important when people look at a tool that really helps compress and I think it's really taking weeks and turning it into minutes and maybe it's an hour, but it really is, I think there was one case study even domestically where somebody said, "Gosh, that was two weeks worth of work and it happened in minutes."
And so it's bringing, I think, compressed investigative cycles, but it's also bringing the fidelity that a law enforcement organization needs in regards to the data, because 95% accurate, it's just not enough. It really needs to be dialed in and perfect, and then it has to match that chain-of-custody bar of excellence that everybody demands.
Shaul Eyal:
That's exactly what we have been stating and claiming about cybersecurity at large, good enough. It is no longer enough. Efficacy rates need to be as high as possible, close to 100%.
David Barter:
And if I could go on that point, I mean, what we are finding with our customers, and this was maybe one of the more touching ones, where we had a number of situations where people said, "I solved a crime." But one that really kind of touched me was a young person who had been convicted of a very strong crime, and AI was able to exonerate that person. And it was one of those situations that would've been a life-changing event.
And almost to your point on accuracy, the 99% said, "This person was here when this happened, and there was a link going to causality." Now it was all correlation, but where Genesis really shined was that wasn't the person. That was not the person that we're looking for. And that was actually just as important to us as finding some accused person, is exonerating those who are innocent. And that gets to the degree of accuracy that we have to have within our tools, where close just isn't good enough when it comes to situations like public safety.
Shaul Eyal:
Absolutely. As we think about sticking with a GenAI topic, back in late February, Anthropic came out with Claude's code, sending shivers in the market, we've seen nice corrections since. From your perspective, do you see Claude's improved scanning capabilities as a potential headwind or actually a tailwind for what you guys are providing out there?
David Barter:
Let me pop up a little bit. I think we approach just AI as a game changer and it's why our research team has been leveraging AI. It's arguably why we've had AI in our products, from how we run our extractions to our forensics product, Guardian. Even now, our product like Genesis, where we believe that just AI fundamentally, it's a pillar of good in the sense of it accelerates how we work. We think it accelerates the investigative life cycle. We just think it's good.
And so we are probably a pro AI company in the form of being on the balls of our feet, figuring out how do we use it to transform our research, how do we transform our operations, how do we incorporate it into products that we think are just very valuable for our customers. In regards to Mythos when it came out, and as you know, it's just a very small subset of people who have seen it, we went and actually reached out to folks at the OEMs. I spoke to one very large mega-cap company, a very senior person who had very deep familiarity, and what really kind of caught my attention was the response that I got.
And so I probed to understand what they had seen in Mythos, what were the defects in the code that they were catching. And the part that kind of caught my attention was their observation was as similar as our research team. When you look at Mythos, and you look at what it's finding, but then you look at how Cellebrite technology works, where there are elements in the code, we would call them vulnerabilities, they turn into exploits, but they exist because software and hardware have been designed a certain way to achieve either application performance, a user experience, overall what they would term usability.
And this person characterized, "I suspect you're going to be going after the same framework that you've always had. That's not where Mythos is really positioned." And so I think we look at Mythos probably with excitement. We certainly always will look at it as humility in the sense that it has some game-changing capabilities, but with a hardware, software-based solution, I think we remain excited about the world.
Andy Kramer:
Maybe what would be worth adding is we don't look at developments and innovations like Mythos as an existential threat to what we do. It's an incremental advance on how vulnerabilities could be discovered, and either exploits or patches could be made to that code. But if you look at the totality of whether it's code base for a mobile phone or the amount of applications that are out on the Apple Store or Google Play, the growth in those code bases, the growth in the number of applications is also resulting in more security vulnerabilities, more security flaws.
And some of that is a function of AI being used to generate code. So in some ways, these new tools like Mythos will help keep sort of an equilibrium. I think creates some level of challenge for our business. It will also create some opportunity for us to leverage tools like Mythos in our work in discovering vulnerabilities. And I think ultimately the barriers to entry for a business like ours continue to go up. The costs involved with keeping pace with change by the phone OEMs continues to escalate, and then the value we deliver also increases.
Shaul Eyal:
Good point on that high barriers of entry, which kind of takes me a little bit into my next question. We have seen Cellebrite performing small-scale acquisitions, broadening its capabilities. Talk to us, for example, Corellium on the one hand, all right, and then as we think about you guys expanding, for example, into the drone emerging or super fastly emerging category, how do you see that also playing out in the coming years?
David Barter:
I [inaudible 00:12:17] tend to be a fan when it comes to M&A of letting my customers kind of guide me, particularly in a platform approach where we're innovating as quickly as we are, and we have an approach where fundamentally there's a lot of product we can build. I think you've seen just how quickly either our investigate product has hit the market or something like Genesis, but we do feel acquisitions also are just a very logical element of our platform strategy. And so I think we'll continue to allow our customers almost to guide us and say, "Gosh, again, you bring up the drone acquisition."
I think 99% of their customers, if not 100%, were Cellebrite customers. It was one of the best deals. It was so easy to see how that logically fit within the fold. And so I think we'll continue to leverage that type of recipe to figure out how we acquire assets that are growing very, very quickly, but they're also, in some cases, customers are saying, "Gosh, that's a mature asset. It would be great if it were part of your platform where you could really continue to use your innovative prowess to help it scale up and again, keep it on the innovative edge." And so that'll kind of continue to be our framework.
Shaul Eyal:
And we would even add from a valuation perspective, it would appear, at least on our end, they came with really reasonable valuation level because what we had seen over the course over the past few years, specifically within the cybersecurity arena, is high multiples, big checks being written for many prime assets. Gentlemen, any closing remarks?
David Barter:
Just thank you so much for having us. This is a real pleasure to be here with you. We really appreciate all of your research. Appreciate just all the observations that you have on Cellebrite, and where we are, but also the Cellebrite we're building and the Cellebrite we aim to deliver to our customers and our investors in the coming quarters.
Shaul Eyal:
Thank you so much. Keep up the great work.
Speaker 1:
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