Q3 2020 Kornit Digital Ltd Earnings Call
[music].
Greetings and welcome to corner digital <unk> third quarter 2020, <unk> earnings Conference call. At this time, just restaurant to listen only mode. A question answer session will follow the formal presentation.
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Good day, everyone and welcome to coordinate all births.
First quarter 2020, <unk> earnings conference call.
Always again I would like to remind you once again.
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The company's quarterly report on form 6K.
So first a whopping 2020.
Dennis I think west factors that may cause actual results from that.
Really.
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On this call a copy.
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Additionally, the company will be making reference to certain non-GAAP financial measures on this call.
The non-GAAP measures to the most directly comparable GAAP measures can be found in the company's earnings release published today.
[laughter] <unk> relations.
I will now turn the call over to Ronnie Daniel Carney, Chief Executive Officer Guy at the Dawn Carney Chief Financial Officer at this time I'll now turn the call I'd much rather than running.
[music]. Thank you can't see good evening and thank you for joining us this afternoon unequal.
I'm pleased to share with you that we significantly exceeded our expectation for the third quarter and we are improving our outlook for the second half of the year.
Total revenue grew 21% yield that you to 57.4 million net 2.2 million in Wuhan see late into a global strategic accounts and we delivered exceptional sequential growth of 53%, reflecting the shop goals in equal measure.
<unk> on demand production.
Topline results were driven by a strong demand for industrial systems in North America, and EMEA, an extraordinary quarter consumable and services the coarse ore rejects.
On the services side I'm proud of the work our teams have done to bring this important business to sustainable profitability at quarter's end plan, while maintaining focus on customer excellence.
No. That's we have reached this important milestone we expect services margin to improve it.
We continue to scale the business.
Bottom line, we delivered a strong operating margin for the quarter and we expect to overachieve, our operating profit objectives for 2020.
Our industry is that inflection point and we are focused on leading to the formation of the industry into only men sustainable production.
Globally, we are partnering with our customers to deliver incremental demand for system.
Okay and services as we enter the holiday season.
In the Americas, we are engaged in Alaska and expansion projects with key customers like Stakes Greenfield Dcs and others.
Why don't this interesting projects.
He is a unique partnership for integrated on demand fulfillment or desktop bail in hot topic that Koernke Taylor was fueled by cool neat solutions.
This revolutionary collaborations allow seamless consumer experience on demand digitally printed up at all with reduced shipping cost to the end consumer.
It also enable on demand store level replenishment and immediate Apple store fulfillment.
Any male customer.
Customers in Boston, there is a fully reengage.
And we are experiencing as he said just like.
Like what happened in the Americas in mid to late April.
Our recent investment in scaling out direct UK operation is building immediately south and significant pipeline build up.
Nate back we see encouraging signs in.
Industry recovery and we continue to scale, the local sales and support infrastructure required to deliver on global expansion projects were strategic customers.
Yes, Bob <unk> continued focus on this important region. We are excited to welcome. It don't feel based seasoned executive Elan, the lad to lead Asia Pacific and Scana operation in this region.
From a product perspective, it was a record shipment quarter for Atlas system.
These unprecedented success gave us a huge confidence to accelerate R&D efforts and go to market blending for the next generation of application that this platform will support.
We expect and they asked us to be the foundation for continued growth in that used to come.
Oh, we're kinda plus also continues to have considerable traction with customers investing fleets to produce lots volumes of midsize ones.
On the Dts side, we have seen phenomenal momentum fueled by the accelerated transition of the fashion industry to on demand sustainable take some manufacturing.
Customer realize the huge benefits of this business model into fashion and home decor markets and no telling us that coal needs offer the best end to end Big men based retail quality solution to support this model.
In the second quarter, we closed an important deal, which gets you only did you tally and leading Italian digital fulfillment partner to some of the largest fashion brands in the world, including that's such a.
The single step sustainable process of the Bristol alongside they eat the quality and sustainability.
Basically match, what gets you only and the brands are looking for.
Important wins like these at the heart of the fashion industry makes us confident in our ongoing ability to disrupt dislodge market without a unique technology and we are already witnessing massive well see now we'll beat the EPS supplies.
Executing with our global strategic accounts remains very strong and now deemed a walking around the globe to deliver on the various projects we have in place.
The impact of all acquisition of custom gateway is exceeding expectations and we are pleased with the progress of our integration.
Expansion of our cloud software workflow solutions is at the heart of our strategy and Wisconsin Gateway, we offer a unique proposition to the market that handles all steps that that's driven efficient on demand production since announcement our team globally agenda.
They did over 80, new opportunities and we have already received multiple orders.
Exciting conversations with major brands and for Filos, that's looking to partner with school need to transform the supply chain and now we're looking to adopt our cloud will flow platform to enable and streamline the entire on demand production process.
Our decision to continue to invest in the business doing the endemic is paying big dividends and I'm very pleased that we are in position to increase the outlook. We provided for the second half of the year from low double digit E revenue goes to 25%.
It'll be growth looking forward, we see very strong momentum and we are entering into 2020, one with very strong backlog.
Before I turn the call over to Guy I would like to welcome our new shareholders and thank them for their thrust see no teams.
This sounds exciting times for coal neat and for the entire textile industry.
And we are extremely confident to execute on the massive opportunity ahead of us.
Now I will turn the call over to Guy for a closer look to our numbers and the guidance.
Thanks, Ron and good evening everyone.
We are very pleased with our strong third quarter results and our outlook for the final quarter of 2020.
Before beginning the financial overview I would like to remind you that the following discussion will include the GAAP financial measures as well as non-GAAP pro forma results.
Our third quarter non-GAAP pro forma results reflect adjustment for the following items.
Stock based compensation expenses, which totaled $2.7 million total amortization expenses related to the acquisition of intangible assets in the amount of $396000, including expenses related to the acquisition of custom gateway in the amount of 315000.
648000 acquisition cost related to custom gateway.
And noncash deferred tax expenses in the amount of $121000.
Adjustment related to COVID-19 pandemic this quarter were $74000, we do not expect additional covered related expenses.
As the company has significant operating lease liability in foreign currencies, when current foreign exchange gain or losses from the reevaluation of these liabilities.
These gains and losses may vary from period to period and do not reflect the true financial performance of the company.
This quarter foreign exchange gains associated with a S. C 842 were $110000.
A full reconciliation of our results on a GAAP to non-GAAP basis is available in our earnings press release issued earlier today and on the Investor section of our web site.
Third quarter revenue net of 2.2 million net cash warrants impact were 57.4 million, an increase of 21.4% compared to the prior year period, and an increase of 53.3% sequentially.
From a year over year perspective, we continue to see very healthy demand from our customers serving all line market in the U.S.
For our product and services and significant revenues from our global strategic customer outside of the U.S.
Services revenue for the third quarter was 8.1 million net of 165000 warrants impact accounting for 14.1% of total revenues, an increase of 103.7% compared to the prior year period, an increase of 45.3% sequentially.
Beginning this quarter, our custom gateway revenue and cost of goods are included in services net of custom gateways and excluding the weather impact services generated high single digit margin compared to a 44% loss in the prior year period.
The amount attributed to the noncash impact of warrants in the third quarter was 2.2 million or 3.6% of revenues.
Compared to a 2.4 million or 4.9% of revenues in the third quarter of 2019.
And 842000 or 2.2% of revenues sequentially.
As Ron mentioned it was a strong quarter in the Americas with 59% of total revenues coming from that region, 33% from the Europe, Middle East and Africa, and 8% from the Asia Pacific region.
In the third quarter, we had three customers that each contributed more than 10% of total revenue.
Our top 10 customers accounted for 58.3% of our total revenue compared to 56.3% in the prior year period.
Moving to profitability.
Non-GAAP gross margin in the quarter metaphor its impact was 48.1% compared to 47.7% in the prior year period.
And 44.1% sequentially.
As previewed during our second quarter, earning call.
We're back to our pre call the gross margin level of 50%, excluding the impact of warrants.
On a GAAP basis gross margin in the quarter was 47.1% compared to 47% in the prior year period and 42.2% sequentially.
Moving to our Opex items I'll discuss these items on a non-GAAP basis, which exclude non operating charges previously mentioned and highlighted in our GAAP to non-GAAP reconciliation included in today's press release.
The textile industry is experiencing an evolution that we have predicted for some time and has been further accelerated by our customers as they transition from analog printing to digital.
Not only has this created a tailwind in our system sales, but also significantly boosted inc. and consumable consumption.
This evolution has been further accelerated by Corvidae and represent significant market opportunity for coordinate.
As Ron mentioned, we continue to invest in the business to accelerate growth.
The following line items reflect headcount investment to build the infrastructure necessary to support the growth opportunities ahead of us.
We ended the quarter with 657 employees a year over year increase of 142 employees and a sequential increase of 83.
Predominantly due to 53, new employees, joining us from custom gateway looking forward to the fourth quarter and the beginning of Twentytwenty. One we're planning to net increase headcount organically by approximately 20 employees very quarter.
Predominately customer facing and technology functions to strengthen our leading position in the market and merge our workflow solution.
Adjusted Research and development was 13.8% of sales or 7.9 million compared to 11.2% of sales or 5.3 million in the prior year period.
Additional R&D cost is attributed to headcount addition, and use of materials.
Sales and marketing expenses in the quarter were 7.8 million or 13.5% of sales compared to 7.1 million or 15.1% in the prior year period.
The relative decline in sales and marketing expenses. This quarter is mainly attributed to the absence of trade shows and reduced travel expenses.
General and administrative expenses in the third quarter were 5.1 million or 9.6% of sales compared to 4 million or 8.5% in the third quarter of 2019 the growth in DNA cost is attributed mainly to additional headcount cost and increase India no ensure in cost.
Non-GAAP net profit for the third quarter was 7.7 million or 18 cents per share on a fully diluted basis net of five cents warranty impact net GAAP profit was 3.9 million or nine cents per share on a fully diluted basis compared with net income of 4.7 million or 11.
Cents income per share for the prior year period.
Our non-GAAP financial income this quarter was 1.7 million as a result of accrued interest on our cash investments our.
Our GAAP financial income this quarter was 1.6 million.
Turning to adjusted EBITDA.
For the third quarter Twentytwenty adjusted EBITDA was 9.4 million compared to adjusted EBITDA of 13.1 million for the prior year period.
Net cash provided by operating activities was 20.4 million this quarter, mainly due to a 7.8 million increase in deferred revenues and advance from customers.
A 10.4 million increase in payables and net profit of 3.9 million offset by 8.5 million increase in trade receivables and 4.3 million increase in inventory comp.
Compared to breakeven in operating activities in the prior year period, and 9.2 million net cash used in the previous quarter.
We expect the third driving is balanced to convert to revenues over the coming three quarters.
Cash balances, including bank deposit and marketable securities at quarter end were 405 million.
Compared to 237 million as of June Thirtyth 2020.
This increase in cash balances was primarily driven by 163 million net proceed from our last offering in September this year and cash generated in operating activities of 20.4 million as previously discussed mainly offset by used in the acquisition.
Custom gateway.
In addition to the primary offering Amazon sold 1.7 million shares converted on a cashless basis from 2.2 million warrants for.
For net proceeds of 92 million.
Turning to our view on the fourth quarter we.
We expect revenues to be in the range of 60 million to 64 million and non-GAAP operating income to be in the range of 13% of revenues to 16% of revenues.
As has been our practice in the past these numbers assume no impact of the fair value of issued warrants in the third quarter of 2020.
I'll now transfer the call back to Roland.
Thank you guy with that we're ready to take.
Any question homebuilding.
Thank you at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad calculations will indicate your line is in the question queue you.
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Our first question comes a lot of Tavi Rosner with Barclays. Please proceed with your question.
Hi, This is Peter on for Tavis.
Thanks for taking my question.
You mentioned the strong backlog entering 2021.
On the risk to that.
On account of the emerging opened 19 trends.
I could have a follow up on that just wanted to ask about the drivers of the services expansion. If you could give a little.
More color on that.
And.
And whether whether that's related to some with every new tracks.
[music].
Yes. So thanks for the question. So I will start and then maybe if you want to add on top of me.
They don't so that the Colgate is definitely a tailwind to our industry industries in inflection point.
Scott said, what we can see that the E commerce is booming.
There is a clear move into ecommerce the focus within 2020, 466% of that barrel will be positive for the E Commerce.
And while the eco Mrs is booming and drawing on demand manufacturing is really fueling and it's in fueling the growth of our customers.
And we see the demand.
Growing dramatically for more capital we saw it already form.
To end at real customers peak season, and now with the entering to the peak of the peak.
And ordering system.
We had big projects that we are involved with a cost the wall, both with strategic accounts Wolf with.
And brands marketplaces.
Some of those orders.
All jets are being implemented this day some of them will be implemented early 2021. So this is the reason why we are saying that entering with a strong backlog into 2020 one.
We have a very strong visibility for the first half and we are very positive about the entire deal.
21.
You Guy and he does.
The services question, So we're talking about breakeven.
Services in the fourth quarter Twentytwenty we.
Achieved this goal earlier than expected the initiatives, we were discussing it a lot.
Orders for example, all the industrial machine will go with the with the service contract are now yielding dividend.
Thank you both for the color congrats on the quarter.
Thanks Peter.
Our next question comes a lot of Jim Suva with Citi. Please state your question.
Thank you very much and congratulations on great results and such during a challenging time.
Question is on your prepared comments you mentioned something about you know cobot costs. I believe you said were going down or de Minimis. At this point can you talk just a little bit about.
Cobot overall is still slowing down some deliveries like the logistics for customers to receive an install your equipment or you know get engineering slash architectural.
Electricity permits as installing these big devices, a lot times aren't simply pub plug and play if you can talk to us about those logistics. It those are behind us, we're still causing a headwind. Thanks.
No actually we don't see any headwinds in terms of logistics due to that call grid that.
Actually the opposite we see a huge demand and pressure to install as soon as possible to get the equipment and supplies and services to be ready for the peak season as I mentioned before the Cove. It is a very strong tailwind.
We don't have any limitation in terms of production logistic shipments.
Installation.
So the only limitation of course is about traveling.
Luckily we have we.
We have our own team both in the U.S. and Europe in Asia.
Can install and ramp up our customers and red diesel demand.
And that's all the different needed.
Great and then funding for smaller mid size businesses.
It is the funding a bit of a challenge if you're a small mid size business, giving those challenges maybe ill.
A little more associated with chronic virus or are they passed those headwinds to where they could place more orders with you aren't they are at a point now turning back to normalcy.
Okay.
Looks like.
Just back to normal you know the first second quarter, we thought there's going to be a more credit crunch, but.
Most of our customers.
The ability to finance themselves in some cases based on specific business case, we extended extend credit terms.
But it looks like.
For credit the market is.
Back.
Okay and my last question, just logistics with shipping sensors less you know.
Airplanes and ships going around the world are you, having any logistical challenges of getting supplies or components or anything or is that also well behind us also.
No clearly no we don't have any limitation on that.
Thank you and congratulations to you and your team and thank you for the details.
Thank you very much thanks, Jim.
Our next question comes the line of Brian Drab with William Blair. Please state your question.
Hey, Thanks for taking my questions.
First one just can you give us at this point a clear idea what some of the new products might be for next year, what you're thinking about and how those might expand the addressable market further.
Mhm.
So we can't get into too much detail next is going to be an exciting here.
I think the DPG in the D. it agreed to extend the portfolio in both two categories.
The focus would be both on opening new applications, new cases of he never.
But the customer never printed before so enabling new application, but also getting into adjacent markets.
As well as improving.
Devotees of fall solution don't formation.
Ease of use.
So there are many many aspects that we are looking into it and that we are planning to.
The leeville on them on top of a of course bring in quality.
Workflow is a big.
Emphasize moving forward you will see new products coming on the work flow side next year.
Okay got it thanks. Thank you.
You mentioned DTF how.
How significant a DCF in terms of the revenue mix.
A significant wasn't in the third quarter.
So did you have is still a small part of our business.
But these plus we're going.
Segments within our business when we're looking at that into our outlook into Q4 or is it a day, we see strong growth within this segment. It still will be a small portion we are not providing indication what is the size of the dts out.
The overall business within that it is very interesting to see the strong was little bit supplies.
And it's really strong growth of that installed base in dental the use of consumable.
Consumable.
Got it and then can I just ask quickly do you still think.
The service gross margin can get.
Approximately the 20% range over the longer term and if so over what period do you think it takes to get there.
Thanks.
So again, we didn't we're not ready to give indication what 12, we aiming Oh, we said that though.
We move to a profitable service one quarter ahead of time, it's sustainable or we will continue to see profitability, we are going to improve the profitability. But currently we are not going to give any guidance about what are we aim.
Okay, sorry about I've covered the company too long and I had heard that at one point.
Before your time around it [laughter]. Thanks, Okay.
Thank you bye.
Our next question comes from the line of Jim Ricchiuti with Needham and company. Please state your question.
Hi, hopefully you can hear me Okay. A question I have is.
I thought I heard you say that you had three customers that were 10% or more of revenues in the quarter did I hear that correctly.
Yes, correct.
Yes that if memory serves me.
I don't recall, there being a time, where you had 310% customers is this the first time that's happened.
The first time, we have a direct customer acceptance.
And is there any color you can provide us.
The other two customers I mean, I think in the past you've had one or two surface, but is there any color on the type of customer.
Good.
Yes, I mean, we cannot get into the name of the customer and those are big projects that we had moved in into them.
A quarter ago, two quarters ago that you're working on or both.
Overall, we though you know customers.
And of course, the walled or actually two of them across the world one of them in North America, but we can look to add.
More more color.
Rodney if we think about the traction that you're making in the market you obviously your raised.
Raising your guidance and expectations for the second half and I'm wondering.
And maybe you alluded to this before I joined the call a couple of minutes late but.
Is is the traction with some of these larger customers helping to drive some of the the faster stronger growth that you're anticipating in the second half and generally that what sounds like a fairly strong outlook into the first half of next year.
[noise], yeah definitely part of the goals that we see with existing strategic accounts and not only was up low but strategically Tom what are the strategic accounts that the addition of strategic accounts that we had before but what we see recently.
New midsized accounts are becoming very material for coordinate on big projects.
We are entering to some very interesting project with the Rand and marketplaces.
That's a very very interesting and then that Bristow is almost a new segment for entering mostly net new customers.
Each one of them, we see them going very far from multiple no information.
Okay last question if I may just you guys have had.
Had great success and a couple of geographic regions and if I look at Asia Pacific It's been a small part of your revenues for some time and yet you would think that that would be a big opportunity and I'm wondering how we should think about that you've announced some idea.
Additions to your management team there.
What should we be thinking about in terms of the APAC region for you guys.
So we believe that Asia Pacific is going to be a big.
Huh.
Revenue growth.
Big pillar within a coordinate future business.
And we need to understand that currently the last I would say one you are little bit less than one year Asia Pacific is totally closed can you cannot travel from country to country.
Within Asia Pacific and only now that's starting to we open.
And Oh for all said as we've mentioned in previous calls is many wrong, China and Japan, Australia.
In Korea, and we see very interesting move both in China and Japan.
Do some very strategic at play there when rents when market places.
We still feel there's and also also slightly are we starting to see very nice and at night and constant business coming from Australia.
Got it thanks very much congratulations.
Thank you very much.
Our next question comes the line of Patrick Ho with Stifel. Please proceed with your question.
Thank you very much and congrats on nice quarter and outlook.
I apologize I joined a little bit late so you may have addressed this but its not I was just wondering a with a strong outlook for the December quarter and as you look at 2021 as a whole how has your visibility I guess improved probably over the last three months and as we go into this.
Per quarter in terms of say you know the first quarter or the second quarter of 21, and I'm not looking for a quantitative qualitatively how do you see visibility the ability to add on more waters and continue to build backlog.
As we get into 2021.
I would say that we never been in situations that are as of today that we have.
It's very very clear visibility to the entire H. One so we know how each one will look like we have a confidence about H. One oh, we are engaging big projects and of course, the wall or something on the meat of the implementation I'm.
So we have four full confidence about H one the team is already engaged about building the age too.
Which we are starting to have line of sight as well so we feel comfortable about the confidence about Oh 2021.
Great and I see on your presentation, you talked about several other products like the activists and the Vulcan plus an attraction there can you details.
Custom or the types of customers, particularly for the Atlas are you seeing that broad base across both brands as well as from fillers in terms of the adoption of the Atlas.
Yeah. So the Atlas so we see adoption, both with full field knows that.
But laying in the only men marketing E commerce some of them directly to consumers some of them with directly with businesses B to B and B to C.
We're entering into traditional screen printers that they understand that they have to move to do on demand.
And they're buying digital and choosing a cool needs or in terms of the brands that two types in general Oh, Brent Brent that getting into that because all the planning to go fully vertical meaning or do you think.
And and using digital technology to print to embellishment by themselves are and that adult adult dose.
Acting or they're there.
Pluses, but do we see also many brands connecting to our installed base it caused the wall and fulfilling for them.
Which really and boost the demand and are ready to volume falling foundries.
Great and final question from me maybe for Guy in terms of our backs I you know really strong Opex management given the.
The environment that's out there today, obviously somebody that you're benefiting today because of.
Fewer trade shows and things of that nature, you know as we look at 2021 and I'll ask the environment hopefully normalize it somewhat how do you look at Opex and I guess, the the potential ramp that.
That we may see there as more trade shows you know peek into a return.
So.
Again, we're not guiding for 2021, yet, but just to remind you and the other guys on the call Oh when ER call. They started Q1, we actually said, we're going to double down on R&D and we got an increased investment in R&D and technology and you can see it.
Throughout the first second and third quarter, and we expect to continue that trend so.
Opex wise, we are we will continue to invest in R&D.
Assuming.
Trade show will return to normal next year, we might see some increase in.
Sales and marketing expenses, obviously travels a return to.
Who normality in January 1st to see that as well, but our assumption is.
It it will not return that fast we are shifting marketing budget from a physical events, they chose et cetera to a digital marketing today and.
And we will probably maintain and even increase this investment.
Great. Thank you again.
Thank you. Thank you.
Our next question comes the line of Chris Moore with CJS Securities. Please proceed with your question.
Hey, good afternoon, Yeah, maybe just a couple of questions on on custom gateway. So I just wanted to it is the integration fully complete at this point in time, and maybe just talk a little bit about the impact that you've seen already there and you know it is there's still much more to do to really fully leverage those capabilities.
Yeah.
Integration of course is seen in the middle fifth Yeah, we are not fully integrated but the team is working very closely together.
The the synergy is the men that value proposition that we are getting I'm, bringing to the market is super important it's in the hope of they'll start the G. As coordinate and we're getting great feedback from customers Reengage with new business.
You too that workflow solutions that we have now a as I mentioned on the call. We have right now more than 80 or new opportunities a full both selling that of course, the software the custom gateway solution and coordinate.
Since then.
And solutions to.
To those opportunities and.
The opportunities are both we ran and four fields.
So it's really opened for us a huge opportunity in the market or the vision of course need of connecting the rent into fourth into different freeloaders, it's really about the platform.
And.
They won't <unk> platform and the custom gateway unable or co need to really connect the brand to do on the many many fixturing whatever they want all the full Freeman metwo, both coordinate installed base.
Got it very helpful. Thanks last one for me just in terms of of thoughts on M&A.
M&A activity moving forward, obviously very busy with what's going on here is is that something that you're spending much time on at this stage.
Yes, Oh, we have a dedicated team that's looking into and then M&A that ER.
Activities and opportunities are we are looking in two main areas. One is again, a workflow software solution Oh, we identified a few very interesting opportunities that we are looking into them.
And the other one is more about technology, extending a technology solution and if its own on systems and as Jason Mckay to get into new market or so weeks flowing there as well.
And yeah, we had some very interesting, but we see in front of it.
[noise] appreciate it guys. Thank you.
Right.
Thank you. Our final question comes the line of Greg Palm with Craig Hallum. Please proceed with your question.
Yeah, Thanks for taking the questions and congrats on the quarter as well I'm I'm curious how much of the current strength.
Demand is driven by new customers expansionary efforts versus you know maybe replacement or upgrades and I'm curious how you view the upgrade opportunities as you ship more customers to outlets human disease that has a meaningful driver.
Or not necessarily.
[noise]. So excellent question in terms of the upgrades so obvious to the H.D., we almost complete it we still have a few customer that didnt upgrade and we intend to hopefully to up weve been very soon but this one to be almost completed we expect next.
Fear or to see some new upgrade opportunities once we announce them the new <unk> portfolio and a new solution. This wouldn't be a those upgrades wouldn't be invented the four H to make steel. So we expect there and massive growth on its own.
[noise] opportunity in the second half of the year in terms of net you knew two existing it's very interesting at question and then really different from I would say agent to weaken and between segment to segment in the DTF, mostly a net new and as I mentioned, we see ER and lots of goals.
I think from a D.F. market ended the G.
Okay. So in North America, and this quarter. It was around the 50 50 between the net new to existing customers. So while I think that's been going very fast we have we have many many new opportunities the market and then getting too many.
Yeah, a new market segments.
It's similar or in a in Europe and in Asia is mostly net new opportunities.
Okay interesting and I.
Yes.
Based on what you've seen in October 1st quarter November any commentary on how this holiday season might be similar or different than in past years I'm, specifically wondering about consumable consumption. So curious kind of what sorts.
Sorts of end demand trends, you're seeing are you expecting a similar mix of consumables versus systems. In this Q4 or will it skew more towards the systems just based on all the activity going on.
That's always going to be a very strong the peak season, Yeah, I've got them is already fully engage and they're getting more systems. So they they're going to be very very busy.
One thing that we're hearing from customers that they believed that this peak season, we note and by end of December they all talking about the pixi that will extend to generate February.
And because that would not be able to deliver on time because of the huge demand and the backlog of orders that they had so this is kind of a a unique situation because we didn't see before in terms of the mix.
For Q4 between.
Relies too to see Stan its a very good question we.
I would say it won't be very much different from the views it guy I do want to relate to that.
I think it's going to be like a like Q4 last year.
Obviously, a in terms of snake.
Q4 normally war or thinking.
Okay.
And we think it's going to be the same this year.
Okay, I guess, if if I.
The warrant impact for Q3. It appears that you did a 14 and <unk>.
Operating margin you know what revenue well.
As expected for Q4, and your I guess, implying better mix because because of more consumables why aren't you seeing higher flow through in terms of the guide for non-GAAP operating income.
So like we said before obviously on the long run we're we're taking action and we expect.
Gross margin in that longer term, obviously higher operating and net profit.
But we also said that we're seeing a lot of opportunities ahead of us and we're investing in opex, many customer facing and technology.
And this is why we're not increasing operating margin that much.
Okay. So more of a function of just continued investments.
Right.
Okay. Good all right I'll leave it there thanks and best of luck going forward.
Thanks, Greg Thank you.
With that any additions.
No there are no court date.
Okay. So I would like to thank everyone for joining us this afternoon call.
We are very pleased with our third quarter results and our ability to NK cell second half 2020 over the low low teen revenues to 25% goal.
The textile industry is clearly an inflection point in its transition to digital sustainable on demand manufacturing and we have never been in better position to execute against that's opportunity. Looking ahead, we expect a strong close to 2020 and carry a great deal.
We have momentum and strong pipeline into Twentytwenty, one I would like to end by thanking our team.
Employees across the world for their hard work commitment and passion for customer. Thank you very much.
This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
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