Kornit Digital (KRNT) 11 May 222022 Q1 Earnings call transcript

Greetings, and welcome to Kornit Digital’s First Quarter 2022 Earnings Call.

As a reminder, this conference call is being recorded. I’d now like to turn the conference over to our host, Andrew Backman, Global Head of Investor Relations for Kornit Digital. Mr. Backman, you may begin.

Operator. you, Thank and earnings everyone, Kornit first Digital’s Good call. welcome XXXX conference quarter day to With Ronen and today Rozner, Vice me are of Kornit’s Officer; Chief President Chief Alon Executive Financial Development. Officer; Corporate Amir Executive Samuel, Shaked-Mandel, Kornit Digital’s

are statements the would Private preliminary on objectives, financial strategies, statements Before or future. the believes, that developments securities you plans, projected all that meaning projects, Litigation laws, anticipates our expects, or limited address other or this and US the related Reform forward-looking Act or not will to that will company’s forward-looking we to like intends, but remind in made within statements call. the activities, statements These include, events, results of of begin, condition, company statements the operations and be I occur Securities of to of XXXX

risk statements, XX, any Any events filed undertakes revise obligation factors XX-F required identifies hereof, the made results potentially call company’s those results and or statements forward-looking including are encourage Report are the assumptions that on Form statements uncertainties, and to to as update forward-looking that statements. Forward-looking and company cause as differ no Exchange and company’s to Securities actual risks with XXXX, are by to the subject on which the cause Annual by review on the inaccurate forward-looking unknown you or implied and March to could materially publicly based materially. specific or filings except differ I law. known Commission, could of expected this from

is measures the found to time, the on At The of Ronen? earnings to also which website would the Investor making and section. comparable measures I most be these company’s company Ronen. turn non-GAAP call today, be press financial our over the this will Relations to in call. to posted like was reference reconciliation the published release can now certain directly GAAP measures in this Additionally, on non-GAAP

us revenues on that a in the coming Thank day, you, and with Andy, guidance, margins I'm our share line good good our and call. delivered the expectations. with today's you for of start year, operating to just about pleased joining end high to everyone. Thank we

grew For performance quarter, of related our the that EMEA We Pacific, revenue to business mix XX% Asia within and high. across strong and XXXX expansion our strong year-over-year the of record a on very first quarter the in account a continues account. our saw total System and global diversification $X to to revenues contribution We million, strategic its top aggressive very overall and in execute XX revenue by quarter was global with in customers, very net throughout XXXX. growth $XX.X strategic saw to warrants system Americas. million both strong, was the initiatives

leveraging We ability and major of continue Atlas in largest on KornitX our incredible global of automate focused in and fulfillment the to their make This is world, several to retailer quarter. benefits retailers progress with the production, the acquired systems this to major brands, MAX quantities including addition massive scale who network. one of

On and product existing new with customers. strong we Atlas the pipeline MAX the and adoption see of side, a

year Atlas-to-Atlas MAX We will gain and through of the the are initial moving stages to XXXX. pace into along the throughout continue upgrades, which

majority Europe now Presto especially the XXXX. automation MAX, for upgrades, in availability the and of which represents We year, the available momentum with also be part and Pacific, lot the around received had an Asia tremendous customer in second in will see DTF excitement this feedback the Presto, selectively exceptional which on a and the We of quarter commercial of pipeline.

massive a capabilities for an in backlog for enhancing some customers decorative world. we with benefit. several tell the the initiatives upgrades, and see KornitX, the as platforms, that largest to engage fabrics, digital Presto of MAX also marketplaces, increasing dark brands On interesting very in is We continue colored

We enterprises the leading in is with users and are world, platform strategic digital the opening leading particularly that enthusiastic the enable SaaS are about of million Wix, and partnership for all to merchandising add looking one commerce massive launch over XXX e-commerce of the creators globally. Wix exciting community them and upcoming to our platform Wix fulfillment platform its of opportunities. with With to sizes the services, seamlessly KornitX, a build presence. will on-demand

to and excited about expect later our roadmap go We are quarter, live joint this head.

our total addition GMV volumes we of existing pipeline partners, the of running KornitX to opportunity partners, new this with our to our are and platform, satisfied progress. on very in customers some continue scale In massive the and and

the single-step system evolutionary screen As mass where XXXX smart markets, product The be game-changer, will mid-runs exciting Fashion Atlas demonstrated and recently for MAX uses new mentioned call, year the extremely last perfect best-in-class with digital with of our comprehensive most Poly, on officially targeting the and TCE Apollo Tel Aviv, Apollo. we hosted an MAX curing from our output early April, the highest is In successful acquisition. Apollo print introductions. lowest operator. we Kornit production, quality and our the nearshore solutions Week groundbreaking unveiled production completed the mass Tesoma per Kornit

commercial production, traditionally market Apollo strong for see shifting the We and We year, this nearshore second in-season retailers growth short-run onshore replenishment, of brands and of the mass-produced inventory, from lean and movement offshore jobs expect XXXX. mid and to in early availability supporting needs. and in customer fast half engagement the reactivity

powered place soon-to-come in cater to platform, position remarkable and to Kornit MAX KornitX a production Kornit opportunities this Our evolving market trends. by strong portfolio of Apollo, all and mass unique our solutions,

of on fueling macroeconomic pace consumer robust these as the decision a on our business, first started move fully the weigh overall certain purchases this post-pandemic backlog see of growing year not begin certain our customers. dynamics. quarter, While tailwinds volatility to we and but pipeline, with tremendous and to and are and headwinds we into see deeper macro customer us and capital strong the immune allocation we the We

out revenue plans excited of terms some the later such, to this continue purchases half, first expect of We year than our and in be As full into quarters. than shifting activity shortly. half the growth profitability. these and stronger remain second much as for profitability Considering now second of year, to be the of the plan both expect are and marketing expansion Alon the operating continuing and the quarter, near-term and will first major volatility sales discuss in we to quarter, in the quarter lower the investment the it topline, events this

next which extremely place will heading We KornitX week. into energized Week are Fashion London, take

massive we $X expect $XXX of as quarter for not confident ahead event XXX our we investors, worlds million Presto to volatility, remain operating and as and we mentioned, XXXX. billion intersect. where influencers, will the rate become May, remain to focused on on-demand macroeconomics business our catalyst designers, XXXX, fourth the of plan are event, to business demonstrate run will be how overall pipeline at mission We Berlin develop brands, deliver immune coming in attend, quarters. we funnel to retailers, continue and the in and originally a the well opportunities virtual our for while the ahead. in end This journey build expect we summary, In as And over fashion targeted system physical fashion FESPA of to the fully for coming the headwinds to I and and near-term

and guidance. hope me confident customers. working that, we mitigate call extremely factors, are let Thank extremely to external value team again, to next hard the to I and for turn to over the closer in numbers the the the and you, macro a look Alon, our at With We our remain and deliver Alon. in you week see we London.

day Ron, Thanks, to good everyone. and

top quarter range is $X to end $XX million $XX million pleased first million, warrant revenues are account, non-cash $XX.X related above of strategic to of report our guidance just to which a of of million. We impact global net the

our a assumes from As zero reminder, guidance impact warrants.

revenues the accounted we were of non-cash to Ronen strong, the impact to good revenues Services million, in revenues this total year-over-year very net across XX% customers quarter. total strong revenues and and approximately quarter. of approximately Presto. of $XX.X were both XX As sales Systems for increase due for warrant $XXX,XXX. Top primarily XX% of saw XX% very first Atlas shared, business diversification

quarter, Prestos in several the at had mix good MAX Asia first Japan, and including regions, Pacific record of system another with and Presto India. both Looking systems, a Atlas Presto MAX in

Presto very in Atlas MAX, Korea, the a quarters interest several we for Atlas. momentum sports who continue systems across with in major ever, to Japan, provider, years, executed Building good and the In apparel included customers continued of delivered MAX, We Americas, Atlas KornitX. leagues, utilizing and mailing MAX. India. Australia, region in best Poly, past for Atlas including unfolding and one DTG opportunities see new strong over upgrades EMEA the to sports foundations the and for a from upon be will both addition go-to-market DTF and entire professional its both and utilizing China, the direct both solutions our major swim KornitX, company, region interest licensee saw

and additional strong see for to MAX, Mexico a and Atlas as robust for a continue of nearshoring, result pipeline We Systems. in Presto wins including momentum Central America

higher due the sales to non-GAAP growth strategic Europe including in a margin compared to period higher last our sales as net the significant of margins, of experienced both and in systems Asia to XX.X% to gross including same of was account, mix factors, DTF XX.X% largest was of This the Moving in total a revenues, has beyond Pacific. US, impact and the warrants, year. percentage who several and

consumables of had percentage lower as we revenues. addition, In revenues a total

ink During throughout operational mass the new the the up production costs we in believe on to sales fixed the we gain year, We quarter, will our as facility. pick first business. efficiencies consumable in moved manufacturing

by longer efficiencies, levels in second in product and Looking revenues increasing of of the and of half expect primarily saw percentage from term, we to gross forward, to the revenues of XXXX, similar KornitX operational this introductions we half margins revert second initiatives. other our consumable recurring new and acceleration driven back business, year software-driven the

are like supply design macro initiatives, customers, mitigate These reduction Looking strategies, at to as including rates. higher possible. pressures, and chain, macroeconomic this our selective long-term and focused In we interest from the projects, price on working these every commitments, and business immune impacts impacts issues where address overall proactively adaptation, hard and increases. as fully day are chain dual-sourcing not inflation environment, include, we, to continued well supply including cost

sheet, our proactive our supply with initiatives, chain requirements. chain in balance secure confident to our we all on supply commitments, strong and deliver XXXX our continue our Given customer remain our utilizing ability to efforts XXXX

expenses of quarter, and $XX.X fourth X% the first were Total increase expenses. to million, quarter an from year-over-year. Turning operating of decrease a XX%

industry-leading year, our continued EMEA. revenue NPIs, capabilities introductions sales regions, in of continue Sales well see period expenses stated due sales continued last we opportunities with compared of as all million model generate and go-to-market or to strategy expenses last we in of to investments were revenue acceleration meaningful of to development due to XX.X% new same as primarily the XXXX, marketing, $X.X marketing R&D transition I as the million or in of in product support as to million or the as and compared array $XX.X in $XX.X or to regions, of expansion $X.X quarter, some and growth. were quarter in direct in XX.X% XX.X% Research the including million As quarter XX.X% invest our KornitX. long-term and in revenue, and revenue first to of and first including revenue,

The brand We compared and to in the due of of operating the was which the overall Week in will to business $X.X staffing and impact million Week impact. second as or Fashion XXXX. of quarter invest continue first initiatives, $X.X support well non-cash awareness increase million X.X% other of marketing including revenue, sales warrant General $X.X or quarter Fashion administrative loss customer-focused $X Non-GAAP investments as X.X% million million, net infrastructure. to other first was Aviv, revenue Tel of and expenses in as expenses the in and events, quarter. KornitX to London, were

the of increase to diluted primarily in from sales first income per marketing. million compared $X.X previous to $X.XX net for $X.XX quarter increase last X% warrants, impact zero with were of non-cash a quarter, on share quarter an the basis, guidance employees, warrants. for the the or first Excluding million employees and line assumes share was XXX the XXX, our with the and year-over-year quarter, operating We per impact of of of or fully quarter in a as R&D margins which X% ended year. XX again, in first the Non-GAAP and of $X.X

First quarter quarter net compared or GAAP EBITDA in for share of first of GAAP $X.X or $XX.X compared of per $X.XX profit of first first the million, the net quarter $X.X as XXXX. per loss income was was a loss $X.XX million, the of million Adjusted million to $X.X for to XXXX. quarter as share,

see quarter order operations Our first expenditures cash cash approximately to and collection half receivables, anticipate capital quarter. on $X.X million largest versus of timing our the the of grew marketable $XX.X a no flow. quarter, securities strategic balance, over peak account, want primarily end, a quarter to we The strong a due we in later and materially including was of drag last in decrease next collections cash second the $XXX emphasize in at used improve came in in first the bank cash deposits our the producing of quarter, during to issues the $XX quarters. fourth million, of and I ramped several quarter-over-quarter, and that million, quarter. receivables season off We to million sales first

in used Atlas building categories times also This into up to for upgrades, automation and we components and balance key secure begin and MAX long our including materializing chain, inventory to which shortages. sheet of due XXXX. lead We expect supply our includes to XXXX

made programs. go-to-market for key We also advance payments

to Turning guidance.

impact we customers, $XX million. and capital currently near-term decisions to between As given to of revenues be second volatility, macroeconomic quarter Ronen certain million consumables on and expect the $XX mentioned, allocation overall

quarter. the stronger the third We be expect than fourth in second to quarters revenues and

the NPIs, operating in the topline expect multiple we considering and the Week second than on Fashion London, near-term quarter. industry to and the quarter including events, Tel significant in business, events volatility investments and the investments addition, the in first like profitability including be and continued FESPA, In lower Aviv

operating guidance half X%, of to be expect we to second be fourth from it to strategic X% the margin want EBITDA -X% issued margins Ronen. year, assumes in higher X%. operating with zero quarters second in to and to we in in that, to the Further, operating turn margins quarter expect low I the the and our third with Specifically, back all account. in margins of me between that quarter let mid-teens. global to With the impact value of reiterate warrants the fair

the Q&A you, session. ready Thank now Alon. Operator, we are for

Thank Instructions]. you. [Operator

Jim from Jim. Citigroup. Please first go with ahead question, Suva The question from comes your

questions. the more primarily actually not related much. a very Then you slowdown you're slowdown, absolutely not global strategic with? When your other is that mention Thank customer, I it's and follow-up. the have is have few to you accounts and a or I it customers the it's that that, dealing and

it's Thank a segment. you, that Jim. coming The mainly view. it's we see, e-comm the slowdown mixed Actually, from

and customers from that we on views the many have are We different based see building the different e-comm, business customers.

of to referring high in growth XXXX, expectation growth, in this continued growth, see but were account. very QX, strategic and in tremendous only You also we our tremendous a XXXX. Actually, in global tremendous case, in growth QX, have we not

other see during delayed saw impact hand, e-commerce, slower by now during during a of and customers, a in we other systems. And acquisition that, now which and during the the supplies new the they also growth we QX of decision QX. QX, on saw on business. also their customers some specific QX, slowdown On And

segments other serving. that we other tailwind the we hand, a strong in see very On are

specifically, the to We customer customers and It the and growing major retail both see DTF and momentum grow. and and to growth. momentum MAX from is that’s Presto fast. also the a MAX. other example, into QX, see and very Presto the specifically, space, that growing from to moving we jobs from retail nearshore, For China, market, really that to that Bangladesh, e-commerce, quarter Interesting continue for the was from enjoying see small strong continue retail momentum customers are Asia. strategic very We with and with a working coming we in see it QX customers offshore, those fast. serving see onshore

we feedback London revenue Wix coming a few a coming and partnership and growth EMEA, are see We from that Fashion a doing and into the MAX, QX major great we customers, HX Asia, also KornitX. with see for into actually businesses FESPA. quarter and material a due the but strong adoption. expect are the continued quarter Atlas growth Asia XXXX. partnerships is see other to growth a EMEA major the starting of also nice in on with very announcement from - we while today see we slowdown also some EMEA, second we’re in coming that we there, expect from very developing, see EMEA, record Week activities and from we other to a in And

mixed purchase to in now few but serving stage. QX customers deciding Jim, a system definitely saw, see in to the of that’s it’s summarize, So, e-comm view, QX, we we that in and a later delay new to

of in will Some to XXXX. HX them and some even them delay will of buy

follow-up Okay, the or shift the QX the my kind What down to you're now? to of about is, you wasn't about you talk months what of thank gives three And confidence this giving of second right then like year. ago, conviction my likely improvement you. last in happen. an it this seemed as that, for or Because half opposed

you so curious And so, much. second conviction. about I'm your half Thank

Yes.

We slowing e-commerce overall accelerating. fast. are very, see So, in offshore see unique of seek million year trends business consumer believe just We We than onshore. XXXX. close. the before. the believe fundamentals the on $XXX the the was vision of in XXXX versus last expected actually the we growing and kind where a QX have in billion $X rate is than growing earlier very it run long-term road. All bump or the growing. the QX see moving down of We It’s We to

So, were will printing, in much all be growth. you stronger trends HX. than be be short that and And and profitable, than the were the believe talking, that major a to driver major short and will run much definitely HX mentioned, It HX, we our stronger. runs as we is production, why sustainability asking it'll more Alon

of First have orders. a to line sight major of we all,

account. is our global of Some from strategic them

So, definitely you but in and QX, global strategic XXXX. the revenue will not continue QX, coming, only seeing in and QX in account, also from

and Poly we’ve We the have that QX, Presto implementation got major during introduction during product will the orders Atlas HX. be MAX is which the and already

a high on remember stronger always And HX have of we orders. visibility QX in consumption. very terms season. always So, that much in is peak is

So, see much versus a you HX HX. will stronger

you Thank you. so much. Thank

Thanks, Jim.

Next question, please.

The Yes. question next question. your Please Barclays. with Rosner Tavy from comes from proceed

for I first with talk Thanks my to taking Hi. wanted the questions. progress about print.

opening you're progress. significant you’re a the having quarter? why about in mentioned that adopt seeing You it of adopting or to just of last talking brands. still when moving they And conversation Are the does remarks Kornit? I'm into to compared with interest level also rather compare, curious to get the Kornit, sense How they're

question. Thank Very good you. Yes.

see different with decided, and and So, production. remarks in will the and start engagement a top brand different behavior on brands they're of fashion some mentioned side. very running them, of world. vertically. the they The all, We world. from fashion, one my working strong the the And of EMEA, of We top brands They opening And growth acquired picking a see first up is brands brands. and few through see in of one grow they're that we KornitX. accelerated five also MAXes, Atlas I specifically the of growth to they the biggest

as KornitX adopting main vehicle. them the of Some

Some them some to mode. hybrid vertical, be kind would of the fully them like and of of having

tens of hundreds with engaged to the working of week and could mid-size major and on-demand vision Week, transform across fully, directly London I will major, brands are in We and of Many them Fashion brands next world. you, sustainable. be to are with, tell the the business consumer, fully

generated the focus with to all, wants chain that in crisis what last waste supply deliver of is brands, in years, driver they the So, two to deal nobody and going of being in that were the and being of they're for need the main to terms terms both they the increased to when dealing get, able cost. the first

would it production. to control they to would So, this move And specifically they in without locally to the do way, like to like on want to a in They is production digital, supply Kornit. they would nearshore. use like sustainable why waste chain, sustainable and and all and

and totally So, in behavior clothes, react it those to be and consumer And to like that, are across the brands by of to unique, SKUs, what choose different we to major, would would the and see people wider and to like to to it have trends. the of course, proactive up customization even and the needs the the major be different Consumer and much allow is entire today from board. consumer personalization, the past. today was

So, main specifically digital I they're those the drivers quality. the specifically would say why Kornit the is adopt that Kornit is the with brands, that One and Kornit. and for talking why one are to adopting brands more thing

are better quality, that almost brand Screen in of only quality, was get the the terms In to in it It We past, highest has quality. the was there. of the the terms difficult need. that durability was the the there. brands appearance, both one

time, suppressed of appearance, of adopt we’re And digital. different very Kornit far by durability, better, MAX the and the it's being now, first the very, tailwind application the technology with trends screen all quality the in for to attractive terms range. With both market

to wanted KornitX. Thanks about talk that. I Right. And for

the the road, mentioned the be of down the the that front what just you ramp-up? business. Wix, this with on and are I'm I'm next for - the looking assuming helpful KornitX So, stages partnership and will end looking

Yes.

it quality. progress are fulfillment demand on focusing, is I also that’s Wix, Companies GFN, like from in maybe touch and will The So, but areas we generation. in fulfilling other nice global consistent the world on really both KornitX, see a we progress. network the the around everywhere that the

the platform use are many, ease In forms. and we have we the the improving on the the see progress So, we time discussions platform. focus. and few of of many months, management And areas of course, the about discussions, two last capability of all those

the focusing with on focus like platforms fashion now right focusing major on but the brands, fashion, is industry, fashion are We Wix. the we’re KornitX also main - platforms,

with use is to gifting now to of great We world of Canva starting starting also platform KornitX. the one us. major that’s are a already through a leading platforms work the example gifting a platform, of running

major we’re starting see So, to adoption.

We are tell TV I platforms - talking so - with music world, can and many around all of with the platforms about on. you, think platforms many, and movie platforms and

potential of industry, we create them KornitX. to All to monetize fashion are merchandise to platforms around use mainly see their the And progress. leveraging KornitX major

from I and mentioned, to we XXXX. this to As KornitX HX in accelerate really will - meaningful coming we start to expect start see revenue growth we year, see KornitX, in

seeing the if competition, press solution. you seeing you're as concerned the something at digital may. manufacturers more Off release I of I'm of just screen last that all? well? DTG from that Are that one, equipment And - Is going Thanks. starting screen-printing into

the I with, we automation, we've bigger the we durability interesting The the are believe far, see MAX, Actually, KornitX answer moat bringing first we leading else have, there is but technology, the We also really quality now technology, always on demand our will Apollo, fulfiller. the market our competition, with with very the the two to new had both I'm products with that a that the years, don't mix compare This not In very, have we that, that always and have connecting the we productivity products. platform around platform to strong top much Presto by build any that our our we to that is actually DTG of ease developed of competitors. of all, gap have the versus of of and anyone competition. the created a and space, print have, we around I that last DTF, quality we concerned. nothing use, that’s the that very the

competitors. many our different creating We are of something from

creating are platform. We a

end-to-end our operating an at creating system, of none system, looking these operating really We are and holistic. competitors

It’s are the Presto technologies This us. after with already accelerate next in the marketplaces game-changer, in market. is The year, we’re is the which of this unveiling brands, believe to addressing, our ever really a fully be this Apollo, in changer. than in start. just at the the is $X MAX, segments the we dealing Poly, players with We major replacement the now market. ready with I the most the to a quarter Atlas will with more And screen the committed Kornit, the which are I’m game will and launching of that current going goals billion confident not XXXX. ability reach of This only but and fulfillers, technology

you London. I much. will Thank Great. very you in see

Thanks, please. Tavy. Claudia, next question,

Hall your next from you. The Sachs. proceed Thank from Rod Please comes Goldman question with question, Rod.

you. Yes, thank Morning, guys.

products as I out I bit It down. these lower large would this into by out up, the pushed that that more thought to seeing and as reason wanted into their there revenues are purchases. So, situation And e-commerce I think think that year, themselves, probably customers want not wanted more I Ronen. you, demand travel get pushing for that sounded go you to were broadly, they you we to then suppose. dig being the they're little with - fashion demand or so more - evening is, people I macro, a they're for for you, t-shirts guess, Do dig like impacted this demand out? and more,

you going on that and seeing into wanted then a more are ground. So, what dynamic, those customers with the bit on follow-up. what little dig just I to And think's have a

different see that full answers. we And have in consumer demands, and I different not It's the I'm the an terms demands, interesting segments. sure dynamic, behavior of in

we that As that’s I actually environment, the mentioned, see massive customers see the a in growth. serving retail retails

across hoodies see Europe. US, the board. and board, in So, also, with is customers, not that declining t-shirts and mentioned say our as I okay, in but I strategic they global wouldn't the the the demands also on only growth, consumer And tremendous across

BXC, on that see driven without have getting which to We names, customers, and are business mainly their some driving slowdowns.

years. of during Some see. a capacity, and of purchased additional the two they just productions see really they gained the systems last capacity same and to used level them don't They that

the in some QX ready come road, the customers we And at they is it They current course, Some to It’s orders them the seeing for delay decided purchase in this continue going decline is see growing seeing to right coming a few specifically. will growing. of that is it's sure business. now. of grow. the And back. peak this not It of due on will QX. situations to season those their to place stage, planning continue them if just a plateau, a from now, XXXX to see. them It’s direction. E-commerce a it of I'm bump Again, decision they to of to be were If right were will we'll planning, during that not, e-commerce feeling that disappear. HX. is of slowdown they’re and bit a This in

thought Okay. That's Amazon, Alon, the mix more was great, the a you I should wanted could we that Ronen. if be. the And about strategic ask to customer, talk or I in little would margin stronger it quarter. than bit then, you, I get say

very was that strong. So,

demand to but happened you consumables effect, for quantify ink with us? what Did thought? consumables I and Thanks. and happened So, that consumables. mix then ink see get you can ink you all lower wonder what at and I than And

Yes, sure.

I support and also which volatility into - trends change Ronen's global now margin, mega strong then yes, previous to the don't first, dramatic market. uncertainty. the see clearly have we related question, some the fundamentals relates goes uncertainty continue to see in growth, in in to we deal very just and processes, the So, the mean, this margins. we the And any we from some for see growth. to are solid economics, to with mostly we the and market, business macro model and And our deeply answer

for related quarter a DTF. then lot mix, that were and the we good had in install timing base. increases mix think our And of saw terms the lower. strong sales, very a QX for margin DTG DTF. it of result And and volume, strong both QX because system I the to in us towards consumables systems, the the And for volume, is We is in of very deals. very to which was

go levels then we of the in heat game, than have the percentage, half say that growth year as to in when go consumables. cost. back saw lower capacity will And there higher, we we fixed the And new throughout manufacturing we we’re of manufacturing. we It that's In less, And the saw and be of ink volume expected. consumables into why of the will where factors XXXX. the enter the in get second portion was our we the we terms margin that we

XX% when So, to on margin. our be at will gross business, which look HX the similar the means plus around you XXXX, HX,

We gross way on are we into expansion fully we promised XXXX to the margin confident to that to see XX% continue on margin, investors. to the XX%, the will our reach gross as

Great.

Okay. much. very Thank you

Thanks Great. a Claudia, next lot. please. question,

Jared. Please Capital Markets. from Yes, Maymon question Jared the go from next ahead, Berenberg comes

the Wix. on That's the Congrats reassuring guys. on really business. morning, good KornitX good news quarter for and Hey, great

for me. question First

Thank Thank you, you. Jared.

So, yes, absolutely.

made excess for and your So, mentioned, of guys the kind near-term had guidance. in, mentioned it’s you wondering on order back just you shift think contract there’s I the a thought capacity for when problem how XXXX if I'm this impacted of ‘XX, first And I then have entirety then your guys if that on it been weight placed heavily kind that this was question you you with could an your you and manufacturers. then, order, remember if a excess has of QX since incremental that capacity order, that been me, back

Yes.

we inventory timing now raw have higher we QX. in at materials the a There of plans issue is see any our and or change end So, forward. dramatic going don't

the of inventory in All increase was materials. raw

stuck are are systems We not sale. with stock of waiting that for

inventory. We year. half are NPIs, with be for ready at excess we growth risk our in second don't this with are building upgrades, then for and to ready materials We raw the any this the see point of

seeing. come you're valuations more great. the any kind Alon. And have for probably near-term down do bit there Okay, think you guys I'm market? the M&A, it. or just of eager volatility wondering, decrease then, even now appetite is maybe little That's Thanks, that a I'm of curious, private that in you kind in with are got

market closely very and of deeply looking looking more all is many the software interesting, The engaged course, and into we on now So, onto M&As. opportunities, side, are kinds the we of on are that.

is clear. strategic Our very very, direction

in In directions our changing no to operating We the continue the for the change from that anything believe are not M&A, taking the plans. the company. system to we need we in We fashion We will invest that we areas There is invest. as are industry. believe future. becoming in in

it. Got

one Okay. That's it I'm me. - last then And curious, service margins like declined. what one great. so sequentially, just gross looks quick for just

there, So, related MAX then I the is maybe curious wondering, I'm the what what for it's to couple next just Atlas-to-Atlas upgrades, assume and quarters. outlook the what happened but happened of there?

quarter-over-quarter. sequentially, year-over-year, decline The

at to our So, Overall, which and keep way to profitability. on it it's service organization, this business, it plan continue in the each we we much depends very we we in service Overall, continuous specific and service different there much And improvement are see forward. components, and project are building going quarter. related is projects. growth do and investing very

year, major and on margin. growth a expect revenue the to we both see This service,

kits in topline You see both and HX, of on will which in QX and line margin. on P&L, service more the adoption the bottom gross influence start to upgrades the will definitely

there. So, you major will a see improvement

it. Thanks, Got Ronen.

Jared. question, Thanks, Claudia, next Great. please.

Please Brian. go comes question ahead, Blair. William from from Drab Okay. The Brian next

seasonality, to some are the customers some saying, questions. know Hi. some you're Thanks the clarify for like, customers in said - unknown? just related you're second quarter, related and coming these is half new that or from momentum more of it where economic introductions taking confidence come it Are more half does this there back, sounded that quarter, are is And I or customers really sure it you - my the some for all one getting et in you or second second of in you delaying to with just see Or customers the saying of third from uncertainty, then of they're the those all Ronen, of it you're quarter to not those seeing going the thing. we're cetera? guess, to want the overall back to an decisions. product the the the we'll do year. I that are what is knowing delaying year? second I

HX is for year, for but customers. year. customers This our will have systems. we global didn't delayed come it were revenue be of Yes, amount and were supplies, based you. they QX Almost this not are - mix. HX to tendency trends that for QX. The of of have already supplies. it's that the delay have we customers, - also a last that the a a It's trend XX% than not week, on of all, customers in HX them of in see HX. revenue. kind on delay. few commitment overall Actually, first the producing decided customer. we QX, strategic in The is big decided a in slowing Look, some slowing our orders or higher of the recurring few of is We It’s On but those a to trend, our the thank Hopefully, that planning on and decided some they we purchase it’s that will next confidence have And buy and and we we the if that, them of to the purchase. decide Brian, recurring. strategic customers top them, down a to and those we in including QX positive will different to these of all is continue A business. see date planning HX, start at a with buy based basic will down few that confidence come is few

And revenue the quarter, start risk And are to Presto coming will in see shipped release KornitX, QX. see now many thing the on to will a so, be only We main pipeline are only the of them on introduction, the Poly, on new and - we see mainly which of the QX. we we we it and products HX same into that growing by any don't going those. mainly The HX. this producing be on MAX, end QX into into Q from Also, Atlas revenue. impact them,

gross both margin high. confidence much So, it in in and year all our stronger, very be look different, similar into also will saw level operating totally topline we will be very margin HX the gross and is that HX to all, last profit,

it. Got

strong attend had and And some around curious, us and there's discussion specifics I'm And been relationships customers some Analyst in past. any Days your relationship can strength had past, the - of Apparel? on in you've I Okay. you then, you've mean, Delta with certain update the around highlighted that Fanatics your the

good it's a was Yes, question. it. I anticipating

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for decided We Apparel our I'm two the solution. and sure bringing And aware few Delta for a what long Delta bit for on the We working not Mainly, of from support know Apparel, we the They best not that, them. run, they market In and short for of the will Fanatics in have customers, others our quarters, largest competitors. to know look to at for also that screen, Apparel like a be we’re a will the customers. one-off, of and not that continue that that many We more that us one they it. partnerships. with one replacement it. we it last for testing sure they more solution they more with for fleet but as run. with will to make our our They’re a them we continue into systems are believe is acquire of work come. Delta As direct-to-consumer, years are Again, strong Kornit. we Apollo, and get to closely I to definitely not

Thanks Okay. very much.

Thanks, question. next Claudia, Brian.

Ricchiuti from & Thank comes from Please you. Needham Company. next The Jim Jim. question ahead, go

how Thank a application, it using you. these Are brand I'm machines? machines. Atlas this are retail e-commerce this using that. their stores? purchased - supply this kind of I global wanted Atlas as it not hub or using clear an they for that they to back they Is entirely are go on to of to some

at building, be both. more they're get into model than in also this It's stage. many unique - I that. hub the It's because They’re it will and actually business actually like keep cannot end, would say too a to the cannot a like who building to address I to brand, customers. then unveil that But but customer, would directly - the is they combining details they who it is the confidential they

say what decision? their played Ronen, To can at extent, benefits if some of the of into you ESG-type your technology all

their in decision. played that things two say would I Yes.

First our like the They garment. those garments special have to have solutions on in solutions. for were quality would printing best of the developing is all best on They’re quality. the They to testing quality market.

number is chain. is Making production them. So, also key Definitely very important supply for one. sustainability is issue a closer quality it onshore in

some the a dynamics in fleet, also Atlas of the in that you're the market. seeing to just light base, I upgrade with changing And of to do question install respect want of the the follow-up

or as of you seeing correct any as I upgrading think much change me fleet the Are potentially three of environment? light that quarters - Atlas talked Has in if the MAX. that's not. about existing market in past, you've the to the you're queue. seeing respect just good mainly in back I'll the EMEA. sounds in APAC am I And you. like in to environment, momentum this still momentum Thank is It the in US? And assuming in good with market and correct correct jump

mix. strong QX nice Latin Americas America coming different of momentum, we was from So, growth and in QX Americas. a actually seen in into the very in We very as see a Mexico. terms And very, again, actually well Brazil

a growing. product the But of is that very again, are retails customers see We mainly But see road. the growing. indeed, in in e-comm the is in short-term QX in nearshore right producing also I it's that production customers And slowdown we believe some side. is Americas. few bump So, more for Americas from more on now the

now. on the for we Atlas-to-Atlas MAX, right journey the are As a upgrades of

all, install Atlas-to-Atlas changing are of focus First we not MAX. our upgrading their base the of of XX%

our on MAX are the to on kits with major start up on with this that, and on organization lot will MAX the and standard. of of is will QX quality. adoption HX, very We to And new and and create ramping implement more customers. closely be that define the while doing journey of Working the industry. KornitX based the the new we We be of therefore, that are mainly will to a to standard the standard a believe brands upgrade we're you of Atlas for our a standard the support emphasis service putting see MAX it technology. in quality

Thank you.

from Chris next question comes from Please go Moore Thank Securities. CJS you. The ahead, Chris.

Dan morning. Thank you, Chris. in actually It's and good for

impact examples? give accelerating, how happening the of Is you Can you. call. this big business? it on Where you yet? it an nearshoring about having see you bit a quite do it see talked You've some do long-term and Thank on specific

a definitely strongly. inside, but both it the also in it very We Mexico lot, in Yes, US we see in EMEA. see

we we directly nearshore to they It's talking the to used It's been on onshore very that very, But actually North on in growing also obvious. have America. side, producing conventional Far to and the in customers we when those customers but the Mexico East and the in it get very have in that produce a side. see clear, for used that’s are now see never trends both they’re China jobs and get few inside digital North very or past, nearshore. brands America a So, our customers, the from we doing bulk fast starting to few they moving

EMEA lot the large moving orders both onshore, Americas. are in of in and now So, a

That's us. great. And one more for

Given time? Kornit’s gross ASP the others, slate talk you Apollo, impact profile over and about product margin Poly, the again. of can introductions, Thanks MAX, on new

Yes.

actually of in So, system went overall on QX ASP, ASP up.

MAX and the more because And sell the Our the the Polys focus than is we'll improving and even to along higher course, of ASP high-end more the of Atlas of sell of MAX, ASP will ASP the to the MAX. is Presto year, of the continue Atlas you products, Atlas see Atlas. more

to had price also increase, some impact we unfortunately, well, the As which do ASP.

will see So, you it.

mainly QX. gross In in you’ve to think one-off, - margin, from a a terms I - it supplies is low will between very the low in We what systems. low relative and a QX came seen mix very had of supplies it I revenue call on

be right Some QX. starting it using of get order - QX acquiring see, so trends improvement less were customer larger supplies. and in they QX, to for I as being - because to already and to different start now. see mentioned, also a supplies an We We a supplies start QX, had stronger, new it they order focusing in supplies were to for

So, weeks hopefully, let's see that a these few wait more to trends continue.

last QX should or gross year, plus so to very margin. expansion and expect than better margin the margin. much on be XXXX, will of major HX gross is as well. in will XX% similar the margin this in on be XX% And gross terms impact Gross you So, for QX, around

between long-term just to the have XX% add, target we to gross term, XX%. model in keep the And longer our to margin

Very again. Thank you, helpful.

Please Thank from you. The Greg. Capital. final Palm question comes Craig-Hallum Greg from ahead, go

I issues margins system relative on quarters. were expected. Presto a but just for know guess, and to to between gross I were to how fitting for some systems, on there margins in here. were mix better prior Atlas, than it shipments sense Thanks get me sounds like Yes. trying specific expectations

Yes.

that We - a we lot bit also in mix invest previous DTF. according planned. it quarters was was our for margins DTG in and we system a a DTF. than So, to planned it actually expectations, said better We

even good margins for it what So, and was We we planned. better slightly had for we overall, quarter planned systems than DTF. a

good. on sales. late Okay, comment, that for think I And blamed you then, the on receivables quarter follow-up, my

into think you clear I said QX? push-out strategic. from happened don't activity shipments maybe specifically QX Or of I pull-forward that there. a mid-quarter exactly quarter? I from the was late of it, Was global to know, wasn't maybe what to a

No, it getting making and a issue timing was paperwork. of decisions the

after was So, the the start year and quarter the a very relatively peak weak season. of busy

shipped we So, we people And business took the quarter the the some the time end a of the and for timing, the the in collected close second of is off just to got relatively we And planned relax. quarter. to mostly be the quarter. of building AAR due then quarter. most second just the matter half the when up, will of then in saw of POs quarter And not

Yep. Makes sense.

Thanks. Okay.

remarks. further we will over turn Samuel, Mr. you. the closing call no you Thank I to have questions. for

us you on thank and joining for Operator, call. all you, Thank today’s Yes.

Kornit’s we focused opportunity thank I mentioned I and us. earlier, all work to would stakeholders As remain to team and and we laser have of like Thank London. board the front next continuous passion, very in see across a week you execution confidence many much. the thank work thank We'd hard and massive you of great the to to forward like and looking see in for you support on us. and day. you, in I'm of amazing capture to like for would all to

Alon, thank you, And for all Ronen, and Great. thank you you, and thank joining today. us

follow-up me not in and any we hesitate you please do you if see to directly, out have reach should London. to always, hope As questions, to

concludes conference. This you. Thank today's

at lines your your disconnect time. you may participation. You this for Thank