Greenhaven Road Capital, an investment management company, released its fourth quarter 2022 investor letter. A copy of the same can be downloaded here. The fund returned -4.3% net in the fourth quarter. The fund’s performance compares favorably on a three- and five-year basis. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Greenhaven Road Capital highlighted stocks like Cellebrite DI Ltd. (NASDAQ:CLBT) in its Q4 2022 investor letter. Headquartered in Petah Tikva, Israel, Cellebrite DI Ltd. (NASDAQ:CLBT) is a software company that develops solutions for legally sanctioned investigations. On February 13, 2023, Cellebrite DI Ltd. (NASDAQ:CLBT) stock closed at $4.9500 per share. One-month return of Cellebrite DI Ltd. (NASDAQ:CLBT) was 12.76%, and its shares lost 25.00% of their value over the last 52 weeks. Cellebrite DI Ltd. (NASDAQ:CLBT) has a market capitalization of $938.762 million.
Greenhaven Road Capital made the following comment about Cellebrite DI Ltd. (NASDAQ:CLBT) in its Q4 2022 investor letter:
“I also believe my view about Cellebrite DI Ltd. (NASDAQ:CLBT) is materially different than the market’s. As you may remember, Cellebrite is a former SPAC that sells software to government agencies to collect and review data from cell phones and computers. The company supports over 30,000 different configurations of operating system versions and phone types. Given the constant evolution of software, hardware, and encryption, customers need the most current version of Cellebrite’s offerings (low churn).
Cellebrite historically sold their software as a perpetual license with a large, one-time upfront payment and smaller ongoing support payments. Like many other software companies, they now are transitioning away from perpetual licenses to term licenses as doing so typically yields a higher lifetime value of the customer and a less lumpy business, which should be more attractive to investors. There is short-term pain, however, in forgoing the large one-time payments in exchange for a long stream. Given the low churn, critical nature of Cellebrite products, and their government customer base, they should do quite well getting off of the lumpy perpetual license treadmill.
One of the most successful transitions away from perpetual licenses to software-as-a-service (SaaS) was Adobe, which saw both higher lifetime value to their customers as well as a higher valuation multiple for its stock. Cellebrite’s customer base is different than Adobe’s; they deal primarily with government agencies, such as the FBI, DEA, and police departments. Many of these agencies still want to host their own software (“on-premise”) and because they traffic in sensitive data, they are slow to transition to the cloud. Under GAAP accounting rules, when a customer hosts their own software, a large portion of the revenue must be recognized up front. The chart to the left is my understanding of how revenue for a pre-paid three-year contract is recognized in the financial statements if a contract is signed on the first day of the quarter (slightly more muted if signed on the last day).…” (Click here to read the full text)
Copyright: andreypopov / 123RF Stock Photo
Cellebrite DI Ltd. (NASDAQ:CLBT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held Cellebrite DI Ltd. (NASDAQ:CLBT) at the end of the third quarter, which was 15 in the previous quarter.
We discussed Cellebrite DI Ltd. (NASDAQ:CLBT) in another article and shared Greenhaven Road Capital’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
