Cellebrite (CLBT) Q2 FY26 earnings call: guidance and Q&A

What gives management confidence in the business's long-term growth potential given the Q2 performance shortfall?

Management expressed confidence based on early positive signals from new products, larger deal sizes, and successful platform orders, including a 5-product platform order for a leading agency. They noted that 4 slipped cloud deals in EMEA have already closed, and they now understand new EU Freedom of Information requirements.

“I mean when you put the quarter in context, we signed and took down orders probably well north of 1,000. In the end, it kind of came down to 4, and it was 4 that across the line, and it was 4 that involve cloud.”

asked by Shaul Eyal · answered by David Barter

Can you provide more color on the slippage seen in EMEA and the administrative requirements mentioned in prepared remarks?

EMEA delays were due to a new EU law for Freedom of Information, requiring audits for cloud data storage in sovereign locations, which was unexpected. They've since closed 4 slipped cloud deals and understand how to address these requirements. For US Federal, delays on the civilian side stemmed from agencies lacking correct procurement tools for cloud/AI and a new 'foreign entity permit' (FEP) for foreign filers, which they've now secured a master FEP for.

“That required an extra level of vigor that was not made apparent to us at the start is that as information moves into the cloud from investigations that a new EU law is applied for Freedom of information, which meant there was an audit to make sure that any information that we store and process is kept out not only in a sovereign location, but equally as a vendor that we are normalized, we do not get to see that.”

asked by Shaul Eyal · answered by Marcus Jewell

Can you quantify the magnitude of elongated sales cycles and the conviction in growth for the remainder of the year?

Defense and Intelligence delays are less, and confidence remains high. Civilian federal delays were due to procurement tool issues for cloud/AI and the new FEP requirement, causing approximately a 4-5 week delay. They've secured a master FEP. Management has prudently handicapped larger transactions in the updated outlook.

“Our sponsor is a very high-level CIO in the departmental level, was not even aware of something called an FEP, which is a foreign entity permit requirement, which is applied to cloud technology.”

asked by Michael Cikos · answered by Marcus Jewell

How was the CEO transition planned, and how is the internal team handling the change given recent turnover?

Adam Clammer reiterated that the CEO transition was planned, accelerated due to the market opportunity and Shiv's rapid ramp-up. He emphasized that the change had the full support of the entire management team and direct reports.

“It happened sooner than we all expected. And it really happened with the full support of the entire management team. So we're delighted that all of the direct reports are excited and supportive about Shiv going forward.”

asked by Michael Cikos · answered by Adam Clammer

Has the company conducted a thorough review across regions and agencies to ensure no further procurement surprises, and why were these not understood earlier?

Marcus acknowledged the miss, stating they were in an unprecedented situation transitioning to cloud/AI. They've since taken a rigorous approach, working with lobbyists, to fully understand procurement processes for foreign filers in USG, EMEA, and APAC. They are confident they won't repeat the same issues and have precedent, but remain prudent in their outlook.

“We believe with the highest level of working with some of our lobbyists that we now fully understand the mapping of how USG and EMEA is going to apply to us as a foreign filer and we are now confident that we won't repeat the same issues going forward.”

asked by Rudy Kessinger · answered by Marcus Jewell

Can you provide details on the types of customers adopting Genesis and how it's being monetized, especially given annual budgeting cycles?

Early adopters of Genesis represent a 'broad church' including international leasing, state-level AG, and enterprise, with no single dominating use case. Orders range from $6,000-$10,000 to $200,000, with total ARR pushing $1 million post-quarter. Genesis is a consumption product, allowing for more dynamic, in-cycle upgrades and product-led growth.

“So the good news that we're seeing there is we have secured business international level for leasing. We have secured business at a state level AG. We have actually secured business in the enterprise.”

asked by Eric Martinuzzi · answered by Marcus Jewell

Can you quantify the size of pipeline deals lost and how much has subsequently closed, and the extent of sales cycle elongation?

No deals were lost. Of the business that slipped, $4 million has now closed and booked. The elongation of the sales cycle due to procurement issues was approximately 6 weeks.

“So the first thing is the easy one is, no deals or loss. We didn't lose any business throughout this process. of the business which slipped as we sit here today, $4 million of that has now closed and booked, which has obviously made our Q2 very different. The elongation is approximately 6 weeks to the sales cycle is what we've seen.”

asked by Jonathan Ho · answered by Marcus Jewell