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Digital forensics has become a vital part of modern criminal investigations as technology now touches nearly every aspect of daily life. Smartphones, laptops, cloud accounts, and even smart home devices often contain digital traces that can reveal key details about a crime. Investigators use these records—such as texts, emails, GPS data, and online activity—to build timelines, identify suspects, and establish motives, making digital evidence as crucial as physical evidence.

This importance has only grown with the rise of cybercrime, identity theft, and online exploitation. Even in traditional cases, digital forensics can confirm alibis or disprove false claims through location data or social media activity. Courts increasingly rely on such evidence, provided it is collected and preserved properly.

At the same time, challenges like encryption, anonymization, and massive volumes of data demand specialized expertise. As criminals adapt, so too must forensic methods, making digital forensics an indispensable tool for achieving justice in today’s digital age.

Today, I want to highlight a Green Screen company that is leading the way in developing digital forensics tools to solve these challenges. The company is Cellebrite (CLBT). Let's take a look!

The Business

Cellebrite is a global leader in digital intelligence and forensics solutions, selling to law enforcement, military, and enterprise customers. Its offerings include both software and hardware devices for extracting, analyzing, and managing digital forensics data.

The bulk of the company's sales (71%) are through software-as-a-service subscriptions. The firm offers varied solutions including Inseyetes (extraction devices and data integration/analysis), Guardian (digital evidence and workflow management system), Endpoint Inspector (inspecting organizationally-distributed devices), and more.

19% of sales are for legacy term-licensed software, primarily its UFED (Universal Forensic Extraction Device) platform. UFED was a dominant product in the 2010's and still has a large usage base today, although its feature set is being improved and expanded with the Inseyetes offering.

6.5% of sales are from professional services, mainly consulting, initial implementation, and training. The remaining 3% (listed as "other non-recurring") mainly consist of sales for replacement hardware extraction devices.

Revenue Growth and Recurrence

As we just touched on, well over 70% of revenue is from recurring SaaS subscription sales. This is up from just 50% of sales back in 2021, and continues to increase. I think it is safe to say that Cellebrite is a recurring revenue company, and becoming more so by the year.

Growth has also been strong. The company's 5 year compound annual revenue growth rate (CAGR) is excellent at 17.5%. The firm is set to hit that mark again in 2025 and analyst forecasts point to 15%+ annual growth for the next 5+ years. Management estimates its current total addressable market (TAM) at $16 billion, a big runway for a firm doing under $500 million in annual revenue right now.

Cellebrite has announced some recent developments that further support the growth story. The company acquired the sponsorship of the U.S. Department of Justice (DoJ) in its pursuit of FedRAMP authorization, opening up the potential for wider deployment of Cellebrite's tools across the federal government in the coming years. Also, the company recently acquired Corellium, a leader in ARM-based virtualization software, which will help develop solutions for investigating any ARM-based device (smartphones, automotive systems, IoT devices, etc.).

In summary, Cellebrite is selling into a high demand and future-forward market, and I have no concerns about its ongoing growth potential.

Is There A Moat?

Cellebrite has a strong switching cost moat, in my opinion. Its offerings consist of a full "case-to-closure" solution, offering everything from evidence gathering to presentation, making it a critical end-to-end system for law enforcement apparatus. Uprooting a system like this once in place is extraordinarily difficult, risky, and time-consuming, and only attempted if there are significant advantages to doing so. As long as Cellebrite remains a strong solution - and it is considered best-in-class today - it should continue to capture existing clients.

This can be seen in the numbers. The company's net revenue retention has consistently been above 120%, meaning not only does it not lose customers, it tends to substantially increase business with them year-to-year. The firm has boasted of "near zero" customer churn in the past, and with the bulk of its clients being government entities or large organizations, its customers don't tend to go out of business!

There is competition in the space. Exterro and Belkasoft offer similar software-based workflow tools. GrayKey and Micro Systemation have digital extraction offerings. OpenText has solutions in the online forensics space. But no firms have the breadth of offering or market-leading reputation of Cellebrite as of today.

Finances and Management

Here we run into a few question marks. The CEO is Thomas Hogan, who was just named "permanent" CEO in July after serving as interim CEO since January of 2025. He succeeded Yossi Carmil, who was employee #5 of the company and led as CEO for over 20 years. Hogan joined the firm as executive chairman in 2023, and has previously held leadership posts at HP Enterprise, Computer Sciences Corp, and Siebel (among others). The CFO is also brand new.

So, in truth, we have a fresh but unproven leadership team in place now. How they choose to guide Cellebrite is not clear. We did see a major purchase (of Corellium) in June, continuing the firm's history of strategic acquisitions.

Financially I have no concerns whatsoever. The balance sheet has no debt and close to $500 million in cash equivalents. Free cash flow margin is exceptionally strong at over 30%. The business is remarkably capital efficient, with a cash ROI exceeding 150%.

Risks

I would classify Cellebrite as "medium-low" risk.

Probably the biggest risk is exposure to governmental budget cycles, as well as regulatory and privacy challenges to its tools, which are by nature designed to invade privacy. Political waves favoring less tough-on-crime stances could potentially hurt budgeting for the kind of solutions that Cellebrite sells.

I'd also list the executive team as more of an unknown than a risk. The CEO and CFO have been in place for less than a year, so we don't know if they may enact new company strategies that go against what we want to see. There is also the possibility, of course, that new leadership could lead to renewed growth vigor. We will see.

Conclusion

I'm a big fan of Cellebrite's business. It reminds me of Axon (AXON), a former Green Screen stock that is almost a 10 bagger in the past 5 years but always looked too expensive to me (oops). It sells a mission-critical solution that is highly sticky, increasingly relevant with good growth potential, and has structurally recurring revenue. The financial metrics are some of the best I've seen, and the valuation is reasonable (unlike AXON's).

Speaking of valuation, what is the stock worth? Using a 15% annual growth assumption, with a 7% annual dilution rate, 30% free cash flow margin target, and a "par" discount rate of 10.5%, I get a fair value of $17 per share. That's right about what the stock trades at currently. While it is a fair buy right now, we like to wait for a true margin of safety before jumping in. So for now, I'll park Cellebrite on the Watch List and we will wait for a better entry point.

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