Q1 2021 Kornit Digital Ltd Earnings Call
[music].
Greetings and welcome to the Corning Digital Ltd first quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
For anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I will now turn the conference over to your host Monica Gould Investor Relations for Corny digital you may begin.
Thank you operator, good morning, everyone and welcome to <unk> digital.
First quarter 2021 earnings conference call before we begin I would like to remind you that forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, and other U S Securities laws will be made on this call. These forward looking statements include but are not limited to statement.
Relating to the company's objectives plans strategies statements of preliminary or projected results of operations or financial condition, and all statements that address activities events or developments that the company intends expects projects.
Believes or anticipates will occur in the future.
Forward looking statements are subject to known and unknown risks and uncertainties and our base potentially on inaccurate assumptions that could cause results to differ materially from those expected or implied by the forward looking statements. The company's actual results could differ materially from those anticipated for many reasons and I encourage you to review.
On the company's filings with the Securities and Exchange Commission, including the company's annual report on form 20-F filed on March 21st 'twenty, 'twenty, one, which identify specific risks factors that could cause actual results or events to differ materially any forward looking statements I made as interest call. He.
On the company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law. Additionally, the company will be making reference to certain non-GAAP financial measures on this call. The reconciliation of these non.
GAAP measures for the most directly comparable GAAP measures can be found in the company's earnings release published today, which is posted on the company's Investor Relations website.
I will now turn the call over to Ronen, Samuel <unk>, Chief Executive Officer, and Allen Rosner, Cooney Chief Financial Officer.
At this time I would like to turn the call over to Ron.
Okay.
Thank you Monica and thank you all for joining us on our earning call.
I'm excited to share with you our strong start to the EU and outstanding first quarter results.
We significantly exceeded guidance on topline and profitability and our outlook.
Outlook for the year is very strong.
As the world moves into the post pandemic era.
The textile industry is in desperate need to accelerate digital transformation and mass adoption of digital sustainable on demand production.
The business opportunity ahead of US is enormous and we are laser focused on introducing continuous innovation and scaling our business on all fronts.
Our first quarter results.
Another step on our path to become a 500 million revenue run rate business the handoff plane.
Total revenue increased by 152% you'll be to $66 1 million net of sleep on 1 million in <unk> related to a global strategic income.
We experienced another record quarter of shipments for our mass production systems bed headed by the Atlas and the pistol.
Oh recurring consumable business continues to scale and we continued to outperform our profitability goals on services.
During the second half of the last year, we discussed engagements on major global expansion project with multiple strategic accounts, which we are now rolling out.
In March we announced that <unk> will purchase more than 50 Atlas systems. During 2021 as part of its global expansion plan and the what else to begin this quarter.
As an early adopter of coordinate technology.
<unk> has grown from its.
More print operation in the emerging customized design segment to become a global leader in taking digital creative concepts and making them real.
This growth demonstrates the overwhelming potential of digital transformation by creating a mega marketplace that empowers digital natives to conceive and.
Scaled their brands.
We are proud to help bring pool reached the next stage of their journey.
We are witnessing parallel expansion goals, a corso key and strategic accounts.
As an example, we expanded our partnership with a leading supplier of licensed and private label apparel, which produces uniquely designed clothing for some of the largest gaming license So television studios and Mega retailers in the world.
And they are experiencing tremendous growth.
<unk> supplier added eight new Atlas systems do we sleep this quarter.
And expect continued growth in the coming years.
As for our global strategic accounts that execution remains very strong as we move into accelerated implementation phase of their ambitious global expansion plans.
Yeah.
We delivered a record number of systems in the first quarter doubling shipments sequentially from the fourth quarter.
On a recurring DTF consumable business is almost tripled from the fourth quarter and we're very encouraged by this momentum as we continue to build <unk> brand recognition in the hub of the fashion and home decor industries.
The Kony Tel Aviv fashion week was at tremendous success.
More than 40 designers showcased how diversity and individual expression can be in reach and celebrated hand in hand, with a vision or for most sustainable world.
While the event was focused primarily on building awareness the business momentum. This event created is remarkable and we look forward to the global rollout of this initiative in top fashion capitals globally.
Last week, we shared our exciting partnership with makeup on main brand and retailer as those Andy.
And the supply of fashion and U K as powerful as the fashion with Intel get the corporate goals.
As part of this path of sheep joint teams.
Implementing co neat into and work flow and able micro factory do we act quickly to season, no shift in demand and establish more efficient low impact sustainable production process. We expect this partnership to expand into a mega on lane.
Brent.
Killing off on new softer work flow business line is progressing very well and we are engaged in strategic activity with Brent licensed solos Mega online marketplaces existing for fillers and net new logos of all sizes look.
To leverage our unique cloud based software workflow platform to adopt a digital native supply chain for on demand textile production at a global scale.
As well as automate the production flow in Q1, we significantly over achieved our internal targets for new and existing <unk> customers adopting our workflow solutions.
And now pipeline continues to grow as customers of all sizes and breadth of the strategic value of our offering.
Two weeks ago, we made our first strategic new product announcement of the EU with the launch of our Max technology, which establishes a new standard out of on demand fashion and apparel production.
The Max technology delivers unparalleled retail quality combined with our Revolutionary X D. I, a three D printing capabilities for new high density graphic day, Croatian that can replace embroidery vinyl and heat transfer.
Analog process in a single waste free digital pulses.
We also introduced our new patent pending robotic automation technology to significantly ease the burden of manual labor and increase the productivity.
The Max technology dramatically expands the reach of digital on demand textile production into the center of mainstream fashion and apparel and significantly expands our addressable market into lucrative segments like professional team sports.
And that leisure and diverse categories of fashion, where.
The first product from the Max line is the carbon neutral Atlas MX, which is commercially available with deliveries starting in June.
An initial revenue contribution anticipated in the second half of the year.
The Atlas Max is delivered with the Nu X D. I three D technology built in.
And upgrade to the cool neat Atlas systems will be available during the first quarter of 'twenty 'twenty two.
This is just the beginning of the evolutionary future on new products coming from the Max line, which will unlock additional massive and exciting market segments for Colgate.
In summary, we had an exceptional start to the ear and now backlog continues to grow.
In our last quarterly earnings call, we discussed that we expect to see significant sequential growth from the first quarter of the year. So each of the subsequent quarters. We now believe we can deliver our strongest sequential growth in.
The subsequent quarters than we originally anticipated.
Before I turn the call over to alone I would like to personally invite all of you to join US next week for a virtual investor event in which we will share additional highlights of our strategy execution plans goals for software workflow busy.
This line and now longer term financial goals.
Co neat is in a remarkable position and a more confident than ever in our value proposition our leadership position and now dedicated people.
I look forward to seeing all of you virtually next week.
Now I will turn the call over to alone for a closer look to our numbers and our guidance alone.
Thanks, Lynn and good morning, everyone.
Before beginning the financial overview I would like to remind you. The day. Following discussion will include GAAP financial measures as well as non-GAAP results.
A full reconciliation of our results on a GAAP to non-GAAP basis is available in the earnings press release issued earlier today and on the investors section of our website.
Now, let's dive into the financials.
We are very pleased with our strong first quarter results, which once again exceeded our guidance on the topline and profitability.
First quarter revenue increased 152, 3% year over year to 66.1 million net of 3.1 million noncash warrants impact and was well ahead of our guidance of 61 to 65 million, excluding the impact of warrants.
Our first quarter results were driven by record shipment of our mass production BTG and D. T F systems and execution of major global expansion project with multiple strategic accounts.
Services revenue for the first quarter was $8 2 million net of noncash warrants impact of approximately 0.3 million accounting for 12 point for percent of total revenue an increase of 113.8% year over year.
The first quarter was strong and D'america us with revenue more than doubling from the first quarter of last year and accounting for 68, 3% of total revenue.
Revenue from EMEA accounted for 23.7% of revenue and more than tripled from the first quarter of 'twenty 'twenty.
While Asia Pacific continues to experience COVID-19 related travel limitations, we are pleased with the rebound in sales, which accounted for 8% of revenue and more than doubled from the first quarter of last year.
In the first quarter, we had two customers day contributed more than 10% of total revenue and our top 10 customers accounted for 61, 6% of total revenue.
Moving to profitability.
Non-GAAP gross margin in the quarter net of warrants impact rose to 47.1% an improvement of over 14 percentage points year over year.
On a GAAP basis gross margin in the quarter was 46% an improvement of 15 percentage points year over year.
Our first quarter gross margin expansion is attributed to a significantly higher mix of mass production system and continued acceleration of services profitability.
Moving to our Opex items I will discuss these items on a non-GAAP basis.
We continue to investing the business to accelerate growth each of the following line items reflect head count additions and investments supporting the growth opportunities ahead of us.
Our research and development expenses were $8 9 million or 13.5% of revenue compared to 6.1 million or 23 point for percent of revenue in the first quarter of 2020.
The increase in R&D is a result of the accelerated investment in new product innovative applications and use of materials.
Sales and marketing expenses in the quarter were $9 9 million or 14, 9% of revenue.
Compared to 7.7 million or 29, 4% of revenue in the first quarter of 2020.
We continue to invest in expanding our go to market capabilities marketing and brand awareness programs and customer facing activities.
General and administrative expenses in the first quarter with 5.8 million or eight 8% of revenue compared to $5 3 million or 23% of revenue in the first quarter of 'twenty 'twenty.
The mild increase in G&A cost is mainly related to additional headcount professional services and facilities expenses and he is a reflection of tight budget control and continued operational leverage as we scale our infrastructure.
We ended the quarter with 700 employees a year over year increase of 135 employees from the first quarter of last year, and an increase of 28 employees compared to the previous quarter.
For the remainder of 2021 we will continue to invest in growing the organization to support our business, mainly in R&D and sales and marketing.
Non-GAAP net profit for the first quarter was 7.7 million or 16 cents per share on a fully diluted basis compared to a loss of 8.9 million or <unk> 22 cents per basic share in the first quarter of 2020.
First quarter GAAP net profit was 5.1 million or 11 cents per share on a fully diluted basis compared to a loss of 10.1 million or 25 cents per basic share for the first quarter of 2020.
Adjusted EBITDA for the first quarter of 2021 was 10.8 million compared to negative adjusted EBITDA of $9 2 million in the first quarter of 2020.
Net cash provided by operating activities was 5.1 million this quarter compared to net cash used in operating activities of 13.1 million in the first quarter of 2020.
We ended the quarter with strong backlog, including $23 7 million of deferred revenue and customer advances. We continue to expect net deferred revenue balance to convert to revenue in 2021.
Our cash balance, including bank deposits and marketable securities at quarter end was $438 7 million compared to 435.9 million as of December 31st 2020.
Turning to our view on the second quarter of 2021.
As Ron discussed we continue to execute on large global expansion projects with strategic customers and ended the first quarter with a strong backlog and great momentum in the business. We plan to continue investing in scaling our go to market and technology roadmap to capitalize on the massive opportunity.
He is ahead of us.
For the second quarter of 2021 we expect revenue to be in the range of 76 million to $80 million and non-GAAP operating income to be in the range of 11.5% to 13.5% of revenue.
As has been our practice in the past these numbers assume no impact of the fair value of issued warrants in the quarter.
In summary, we are very proud of our Q1 result is we continue to execute on our strategy and are very confident in our ability to meet our 500 million run rate goal ahead of plan.
We invite you to attend our virtual Investor event next week, well I will share more insight into our long term growth plans and I look forward to seeing you all there.
I will now turn the call back to run in.
Thank you alone with that we're ready to open the call for questions.
And at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You may price starting to if you like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before Christmas turkeys.
One moment, please while we poll for question.
And our first question is from Jim Suva with Citigroup investment Research. Please proceed with your question.
Thank you and congratulations on the really strong results and a good outlook.
As the world starts to kind of hopefully get back to some type of post COVID-19 normalcy.
In the countries that let's say are ahead of some of the larger countries you know those that are larger.
I'm sorry, more ahead of the timeline recovery of the pandemic and the United States, whether it be Israel or certain parts of Europe can you talk about the behavior of your customers in those regions are they phasing in production are they doing you know older machines in use.
Any more ink consumption are they looking at newer solutions and your work flow processes I'm, just kind of wondering because it seems like Israel has gotten higher vaccination rates in the U S. What what the trends have been there versus say pre pandemic.
Actions. Thank you.
Yeah. Thank you Jim.
Question, I actually will refer more into North America, where a majority of our customers and revenues coming for them.
And where they'll also advanced in terms of vaccination.
What we hear from our customers. So for the last one and now appears on one year after the pandemic hit.
You hit it.
We see a peak season, there all the time in peak season.
As I see a huge demand coming more from a license.
Licensed shows for more.
Retail from brands.
Iraqi too then.
In terms of the work flow, we are walking very closely with our customers the for fillers, but all for with brands and license sales in retail to connect between them the true.
And the market is moving into on demand production onshore or nearshore.
Production to demand production two older leveraging for Nic technology and now for fillers coordinate introduced the custom gateway solution few months back we see great traction both within our installed base for <unk> and also with retail.
And license sales and brands as I mentioned that looking to change the supply chain into on demand manufacturing leveraging this work flow.
Okay.
Great. Thank you so much and I appreciate it and congratulations.
Thank you. Thank you.
Our next question is from Rod Hall with Goldman Sachs. Please proceed with your question.
Yeah, Hi, guys. Thanks for the question.
Wanted to check a couple of things first of all are you able to give US a book to bill number it sounds like the backlog is really high but I was just curious how high.
And then I also wanted to on full.
So just check the.
I mean, that's a lot of systems there they are taking I'm curious.
What do you think the outlook for demand there is for systems. It sounds like it could be very substantial. So just wondering if you could talk a little bit more about peripheral.
Yes, so in terms of the backlog we are not specifying our the level of backlog, where we have a we specify specifically the deferred revenue that we have the only thing I can mention that the backlog is growing.
And it's in it's in these peak ever in terms of backlog of orders, we have that strong strong visibility for the entire year and we are building a backlog already for 2022.
In terms of windfall as I mentioned, we were walking from them for them.
From the beginning when they were two.
Two employees when idea.
We were going to better for them from Latvia to the U S to Barcelona in other parts of the World, Canada, and Mexico and many other parts.
And they're growing tremendously, they're very successful in adding capacity as we mentioned.
The acquired all the purchased 50 Atlas system, we are in the implementation phase. We just started it in the in Q1, but you wouldn't see the implementation going.
For the entire 2021.
And we would believe that this is just the beginning of continued growth for painful.
Yeah.
Okay, and then I just wanted to double check something with you on the Poly Pro technology.
You are calling it the Max printer, but just curious on the supplies there are those supplies.
Same sort of value and margin of other supply is there anything special about that and it seems like it could be a little bit different suppliers story as you start to roll those printers out and are you still on just double checking you're still on track for this summer for beginning to ship the system. Thanks.
Yeah, so as for the Max technology, we're going to roll the Max technology to different platform, well, we announced the first product which is the Atlas Max.
And the next week or now conference on our conference calls or Investor Conference call, we are going to share a bit more information on the future products that we're going to unveil.
Within them as you mentioned is the poorly we are going to bring the Max technology into the poorly on.
Leveraging off of the Atlas platform. This would be a breakthrough technology I don't want to share more information about it because I would like to leave some of it for for next week, yes in terms of the consumable. This is totally different consumable the value proposition and the value added that we're bringing to the market.
In Maine, we actually going to transform the market totally from analog to digital leveraging our technology and for that we believe are weak.
We can gain a better margin.
On the system side on the ink and also on the work flow.
Okay, great. Thanks, a lot.
Thank you.
And our next question is from Brian Drab with William Blair. Please proceed with your question.
Okay.
Hi, Good morning, Thanks for taking my questions you mentioned during the prepared remarks that you.
And I'm listening to two different calls at the same time, so I apologize if I didn't hear it clearly.
Clearly.
You said sequential growth throughout 2021 in terms of revenue I think is going to be better than you. Originally expected can you sort.
Put a finer point on that and you know what were you originally expecting can you remind us what your what you said and what does that mean for for the year I guess your guidance for.
Second quarter $76 million to $80 million so.
So we're looking for it for something well north of that I guess on the in the back half for the years the quarterly run rate.
Yeah, Brian So as you know we are guiding is only one quarter ahead, we are not giving annual guidance.
The statement that I was mentioning is that we from the beginning and we mentioned that there's going to be a very strong year. We had a very strong backlog for the order of also formed for big projects with strategic accounts.
Whatever we thought it's going to be strong is becoming stronger. So this is the message whatever we thought but we are not providing guidance for the year on this page.
Okay. So you did not say anything about sequential growth from second to third quarter third for it.
No no I just mentioned we gave the guidance for Q2.
Okay Alright.
Thanks, Dan.
And then I guess, you'll talk about this more next week, but.
The gross margin kind of hovering around 50%.
And I think that your expectation is still longer term for gross margin to move above that level, maybe even to the mid <unk>.
At one point the goal was to get on the high 50% range is that still possible and can you help on.
You kind of bridge from.
From $50 to where you're trying to get to.
Yeah. So first of all again, we were going to relate to it next week and our long term goals in terms of gross margin alone going to share in detail, where we see ourself in a long time from now we are committed to cross the 50% gross margin as we said in the past.
What you've seen this quarter usually Q1.
In terms of gross margin is the lowest quarter in terms of gross margin due to the mix between supplies to systems, usually Q1 top line revenue is the lowest doing the ear and the queue for the seasonality is that the supply portion is the highest gross margin on supplies is higher than the system.
In Q1. This specifically Q1, what you can see as well that we had a very very strong growth on our system side.
Also impact the beat on the gross margin, but you.
You saw the growth project, we are very happy with the gross margin Q1 versus you know last year and even when you look at 2019 alone do you want to add anything.
I think you covered it well.
Well.
The two main factors that are impacting the gross margin or the continuous improvement that we see and we pull share. This business is.
Is the quantity is goes go up their operational leverage and we plan to continue and increase the gross margin and the second one is there's one had mentioned is that the product mix we.
We had a very high mix towards systems in Q1, and typically the second half of the year is a more going towards the consumables that are where we have a higher margin there.
Okay. Thanks, very much and congrats on the new product introductions in the results.
Thank you Brian.
Our next question is from Patrick Ho with Stifel. Please proceed with your question.
Thank you very much and congrats on the nice quarter. It starts for the year, maybe first off on <unk>.
Live went really well in terms of systems during the quarter I mean, you talked about the strong backlog you have.
Given some of the issues out there in the supply chain overall, how are you looking at any potential constraint. How are you managing through any of those potential situations, particularly as 2021 progresses.
Yeah.
Maybe I just would like to add something before while the mix of between supplies and hardware was standing into our system.
In Q1, we saw a huge growth from the supply and actually it was a record quarter in terms of supplies the growth, but we see also a very strong supply growth as for the supply chain and age and the issues that we all familiar outside there. So first of all we don't have any availability issues.
Looking forward for this year there is no significant impact also on cost we negotiated well in advance with our suppliers on corporate we don't see any significant impact on cost of course, the pressure on lead time.
Because the availability of goods.
But because we have a we had a very good visibility for the entire year and for the order we placed.
The orders with our suppliers well in advance and we don't see any issue with supply chain at this stage.
Great that's helpful and maybe as my follow up question in terms of gross margin, but maybe looking at it more from the system perspective, you're posting better and better results in terms of the hardware solutions can you discuss maybe one aspect of it.
Particularly on the cost out programs.
Systems become more mature you're taking costs out at some of your newer products come out you can take cost out of that can you describe some of the cost out efforts that are helping long term gross margins.
Yeah.
Yeah. So of course, there's a across the board effort on cost cutting on cost leverage economical of scale and we can see it but when you are a growth business like where we are today, we are pushing stronger and stronger on the growth elements, which will impact much more on the GAAP.
Gross margin overall, but of course, our operational teams working day and night.
To improve the cost the Cogs for start Joe every element of our solution alone anything from your side no I think that the I mean.
We see very.
Good results on on gross margin in systems again, Ron had mentioned we are driving.
Many cost reduction plans within the product.
And on the supply chain itself again quantity as an operational leverage and there we see that our we had very good results, even when taking into account the mix within the systems between DTF and BTG.
Great. Thank you very much.
Thank you.
Thank you.
Our next question is from Jim Ricchiuti with Needham <unk> Company. Please proceed with your question.
Alright, thank you.
I just wanted to go back to your carbon Ronan about the acceleration that you're seeing in the business I mean, it sounds like it's across the board, but what I'm trying to understand is are there particular areas that are performing exceeding your expectations. I mean, you highlighted a few areas presto being stronger.
The brands potentially.
Moving faster can you give us a little better feel for what in particular are the biggest drivers to the acceleration that you're seeing in the business.
Yeah.
So Jamie Great question as you mentioned, we see it across the board and and the drivers.
Is that you know we were talking about all those market trends for many many years.
So people could see the future debt.
For the future become the present today people would like to have self expression e-commerce, becoming the main vehicle for sales.
Consumer would liked with variety of products.
And you need to change the supply chain you don't want with inventory you don't want to get to have waste in two for 30% of your production because nobody's selling it.
To do that you have to move into on demand manufacturing and we see it both in BTG and the T. F. We see it in our work flow business.
Which was designed exactly for that which you will see it in the service business is growing tremendously and it's a very profitable now and as you remember we promise to be profitable for the first time in Q4, we bought it already in Q3, 2020, and look where we are today and our suppliers and is an epic in terms of the growth because.
We're installing so many systems and our customers are in peak season, all the time.
So overall, what's driving the growth of the Mega trends that are just now really.
In beginning of acceleration and I believe it will continue for many years to come.
Well, maybe as a follow up this is I think probably a question for you. It appears obviously based on the Q2 guidance being as strong as it is.
You gave you know.
Clearly.
Operating margin.
Targets that I think were higher than most people were modeling, but as you see this growth accelerating do we have to think in terms of potentially layering in higher operating expense in the back half of the year or do you feel that there is enough.
That investment that you've made in customer support.
And as well as product development too.
<unk> be able to see this kind of leverage looking out for the back half not looking for specific guidance, but just trying to gauge whether we need to think about higher operating expense levels as the business is scaling.
No. So we said that we will have leverage all the time and you should see expansion on operating margin as well next week.
One is going to share more detailed long term operating margin that we expect from the business for.
So we don't want to share more on on that call, but alone yes.
We are a we are keep investing and are we will continue.
Continue to invest in and grow Opex actually I mean, we have.
Good recruitment plans and are mostly in R&D and strengthening the go to market. So we are doing it and we will continue.
Switching people and investing across the board also in the remainder of the year.
Okay. Thanks for electric grid.
Yeah and this is in investment is very very important we just you know in the beginning of the trajectory of Kony.
The market is infinite are.
From our perspective, we have only 1% and.
And to capture to grab the market now we need to invest in more people in the field and more R&D and you will see this investment, but we are committed to all of you that you will see the leverage into the button right.
Got it thanks again.
Our next question is from Greg Palm with Craig Hallum Capital Group Police Force. He was your question.
Yeah. Thanks.
I'll add my congrats as well I mean, maybe just to start off it would be I'd be curious to know can you disclose how many global strategic customers you have at this point I know on the past we focused on one major one and we're talking about the print for expansion now but are there others. I mean, presumably this has been a pretty big driver but.
How are you thinking about this dynamic as more of your customers sort of shift from regional providers for global ones.
Yeah, so let's be clear and defined.
Clearly, what we mean by global strategic accounts. So we have many global strategic accounts, Okay, and we when we are not providing any specification of how many but when we are referring to big global strategic accounts. This refer to all Muslims, okay or not if we are not specifying specific.
Amazon, but this referred to.
On the global strategic problem, but we see our expansion in all our strategic accounts and expanding globally for windfall is a great example of starting in Europe in Latvia expanding to.
So America is also expanding to Asia.
And going in every continent.
Gotcha, but I guess my question is is how much of the recent growth has been due to that you didn't give your customers that you know maybe before we're just selling in the Americas, but now they're expanding globally are sort of icebergs that has that has that.
Been a big driver I guess I'm really looking for some kind of commentary kind of going forward as more of those customers branch out globally as well.
Yeah, it's becoming a big influence on our growth.
We can sit with a as I mentioned many of our key.
Key accounts strategic accounts expanding globally.
We will provide a bit more information on that on our call next week.
Okay, Okay, great and then I noticed that the warrant impact for this quarter was unusually high at least for quite a bit higher than the most recent run rate is that a direct attribution to higher activity associated with that big growth global strategic or are there other variables I know, it's impacted by stock price on a bunch of other stuff. So.
I was just curious.
Yes, the answer is yes.
I mean are the warrants at the end of the day are linked to the level of business and when business goes I then the warranty.
It goes as well to the same direction.
Okay makes sense all right. Thanks, so much.
Thank you.
Yeah.
And again as a quick reminder, if you have any questions. You May press star one on your telephone keypad goes on a journey responding on the question and answer queue and.
And our next question is from Chris Moore with CJS Securities. Please proceed with your question.
Hey, good morning.
Yeah, just maybe start on on on and so that's as Presto really gained traction here you know just kind of want to revisit the ink usage and in D. T G versus D. T F. On how would you compare the typical and QC and the Atlas versus the Presto and you know the margins any different.
Yes.
They use of think on on the Presto is much higher than the Atlas a we will provide a bit more information on that next week on our call.
And compare between the two of them.
The margin is is different between those markets.
On the margin on the breast or are lower on the ink versus the <unk>.
Yeah.
Got it and just as my follow up keep on that theme. So you have talked in the past kind of a basic metric is for a dollar of system sales you can do $2 follow on consumables and services over the next five years does that math is that math the same for for Presto.
Hey.
For Presto is bigger and we will provide more information on that next week.
Alright, I appreciate it thanks Ronny.
Thank you very much.
And our next question is from Brian Drab with William Blair.
Lucy was your question.
Hi, Ron and I'm, not trying to be difficult, but my.
Email inbox lit up with about six or seven emails after I ask my first question.
Around sequential growth throughout 2021.
In your prepared script.
At least based on you know all of the clients that are telling me. They heard the exact same thing I did say that you said.
You expected sequential growth throughout 2021, and I just wanted to give you another.
Opportunity to address that given I think it was in the prepared remarks and in not only.
Did you say sequential growth throughout the year, but I think you said better than accelerating more than previously expected as well, but if I just heard that wrong or we all heard that wrong in the prepared script I just wanted to make sure we clarify them on on where are we on.
The public call.
So you probably heard this right.
As I mentioned that the sequential growth you will see sequential growth moving forward every quarter.
Which will be higher than what we anticipated before we didnt share before what we're anticipating because we are not guiding for the year.
Guiding only one quarter Ed for you can see that the guidance. For example for Q2 is probably much higher than what the market expected and also much higher than what we as expected. Initially for Q2. The same thing we see right now for Q3 and for which would be higher than what we anticipated when we entered to the EU.
Okay and are we saying, though that we expect sequential growth from the second quarter to the third quarter or that debt I guess that seems obvious but I just want to make sure that I'm.
Getting it correctly, you wouldn't expect that third quarter or fourth quarter would be down as we move through the year sequentially would you.
I would say like this.
Again, we're not providing guidance for the year, but you should assume is up H two will be higher than H one.
Yeah, Okay. Thanks for clarifying that appreciate it.
Okay.
Yeah.
And we have reached the end of the question and answer session on I'll now turn the call over to CEO, Ron and standard of Garnett for closing remarks.
So I want to thank everyone for joining us. This morning, we are very pleased with our first quarter results, which exceeded our expectation for top line growth and profitability. We believe that the remainder of 2021 will be no less exciting for kony, we look forward to sharing our for.
That is G execution plans and groundbreaking innovation at our upcoming Investor event and hope to see many of you virtually next week. Thank you very much.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.