Jeff Van Rhee: It was. Thank you. And Yossi, then just shifting gears. M&A. You know, obviously real nice cash generation. I think as you look at the digital tools that are relevant to law enforcement and federal agencies and incorporating them into your platform, seems like a lot of opportunity. How should we think about M&A and the role it’s going to play maybe in ’24?
Yossi Carmil: It’s a great item, let’s put it this way. In a wider context, one need to look at Cellebrite, and as you said, right now it is a platform company. And the C2C platform enable us basically to map much better our decisions regarding make or buy. There is also, if you look at our market, an impressive TAM that we are dealing with and there is a big growth opportunity over there. And on top of that, clearly there is the element of the Cellebrite balance sheet. And we have a very strong balance sheet, as you mentioned, and that enable us to make smart moves, but in the right target and in the right timing. I would like to say, clearly that inorganic growth is clear part of our long-term strategy, by the way, both technological tuck-ins and maybe some larger opportunities, if that would make sense.
And clearly, as I mentioned, the TAM, doing an inorganic move while we are investing a lot on innovation will help us to build the market presence. Just to emphasize. All the numbers that you see right now do not include or include only organic elements. But clearly, we have some targets that we are looking at and if something will be relevant, we’ll update.
Jeff Van Rhee: Great. And if I could sneak in two last smaller questions then briefly. Dana, you touched on churn. I might have missed a little bit of it. I know you’ve had some intentional pruning of the customer base, but just give me a little more context. How do you see churn playing out during ’24?
Dana Gerner: So if you look at our churn, which is slightly above 9%, around 2% was associated with customers that we’ve decided to stop our business with. This will dissipate over the next year and a half, I would say. And so we believe that our normalized churn should be anything between 7% to 8% on an ongoing basis. We work diligently to improve it on an ongoing rate.
Jeff Van Rhee: Okay. And then I guess just lastly, overall backdrop, you talked about budgets, but in particular, you know, been talk from time to time of peers getting fairly aggressive on price increases. Just any observations on what the peers are doing? I mean, obviously Inseyets puts you in a different value proposition. I get what you’re doing, but I’m just kind of curious what the competitors have been doing.
Yossi Carmil: Generally speaking, I’ll take at least for a start, I’m glad to say that this is a value-based market. Budgets are there, this is clear, and there is a clear readiness to pay more for value. If we look, and based on what we know, our competitors are doing the same. Some are increasing prices on an annual basis as part of a systematic approach, sometimes per version. And some are increasing prices as part of a, I would say, long-term strategy. So, one, we are no different. We are different in the fact that we bring a differentiated offering that basically justify higher pricing. But I would say that’s applicable for the entire industry.
Jeff Van Rhee: Got it. Thank you.
Yossi Carmil: Welcome.
Operator: The next question comes from Doug Bruehl with J.P. Morgan.
Doug Bruehl: My question, maybe one around your FedRAMP authorization announcement. Any sense of how large of an incremental market you expect at eventual approval to unlock?
Yossi Carmil: So, first of all, I would like to say that FedRAMP is a meaningful part as part of the expansion of our value proposition and making an even stronger differentiation in, I would say, our compelling C2C, Case-to-Closure platform. Specifically, that part of activity is more aimed to the area of the federal business in the United States. And clearly, we are investing in FedRAMP in order to open more doors in that space and practically increasing the total available market. By the way, I have to say that our federal business is very strong as it is right now, and that only strength that we have a very strong base in order to expand. Specific to your question, we assume that this is something that can even double the size of what we do today.
Because with FedRAMP, it will enable the company to access definitely additional buying centers within existing logos that we have already today. And if we will be quick enough, and we intend to be, in the middle of 2024, we believe that we’ll be in a situation that we will pass certain processes in order to talk about it. So in the second half of 2024. And with that we can guarantee or capture budgets of 2025. I have to emphasize as final statement that FedRAMP is not specifically to one or other solution, it’s applicable to the entire offering of our Case-to-Closure platform. So both for Inseyets and Pathfinder and the Guardian, everything can be offered not only on-prem, but then also on the cloud. And FedRAMP will enable us, as a final role, to show level of security which meets the hard demands of this specific segment.
Doug Bruehl: Great. Thank you so much.
Yossi Carmil: Thank you.
Operator: The next question comes from Jonathan Ho with William Blair.
Jonathan Ho: Hi, good morning and congratulations on the strong results. I wanted to start out with a little bit more detail into the Inseyets sort of a change here. Can you — maybe help us understand what’s changed with the product and how you’re able to speed up investigations and sort of raise productivity with customers?
Yossi Carmil: Sure. Inseyets is — and I’ll talk specifically about the Inseyets collection review. Basically brings to the table capabilities, which were, well, stand-alone disconnected within some — few solutions. On the access part, it enables a much quicker access and it also enables to access via ways or in collection that used to be part of our high-end premium only. For example, full file system, and I remember we talked about that in the past. Then it’s about the processing and review elements. We are talking here about Factor IV or Factor VI in terms of speed. At the end of the day, if you think about the major KPI in a typical lab of our customers, it’s how to reduce backlog and how to access more devices faster as part of a piling element of digital sources as part of piling investigative open cases.
So when we bring together methods, which were only on the premium, together with the higher speed, combine that with a much better UX UI that’s the result that you get. And that’s basically the value that it’s going to bring to our customers. As I said, by the way, since launch, we are getting really terrific feedback about how Inseyets improve mode of operation within labs and within investigative units.
Jonathan Ho: Excellent. And then with regards to the C2C platform, do customers today purchase these solutions as a bundle? And how do you think about the go-to-market motion and investments that you need to make to maybe shift this to be a bit more of a strategic discussion?
Yossi Carmil: So I think it’s important to understand that today, Cellebrite offers a real end-to-end platform. And not just, I would say, a pile of stand-alone because on the tactical level, clearly, a lab will continue to buy, collect and review, will continue to buy Inseyets as such. But as I said in the beginning or as part of an answer to another question, for the Commissioner or for the Head of Investigation and Intelligence within police, it makes less sense today to talk about collection as stand-alone because the reason need to see the entire scheme of things, how do I collect. But then with a streamlined platform like ours, how do I share and review as quick as possible? How do I improve speed and quality of discovery?
How do I deal with chain of custody, something that we do with our streamlined Guardian, which connects both collected data from Inseyets and analyze data from Pathfinder. So this is not only something that we position. It reflects a thing and the entire direction of our customers is going into a streamlined environment, which forces basically or enforce and makes a necessity for an end-to-end platform and not just, I would say, pile of stand-alone solutions.
Jonathan Ho: Great. Thank you.
Operator: This concludes the Q&A portion of today’s call. I would now like to turn the floor over to Cellebrite CEO, Yossi Carmil, for additional or closing remarks.
Yossi Carmil: All right. So first of all, thank you all for joining us, and thank you for taking the time. I would like to emphasize it was a very successful year for the company, especially from background of several challenges, it was really a very good year. The future will be even better. And I have to say that we are excited about the opportunity and about what is expecting us as part of the future of Cellebrite. I would like as a final word to thank again to all the Cellebrite employees for their professionalism, for their resiliency and for the engagement and obviously, for the great results of 2023. Thank you all. Have a great day.
Operator: Thank you. This concludes today’s Cellebrite’s fourth quarter and full year 2023 dinancial results conference call. Please disconnect your line at this time, and have a wonderful day.
