Q3 2022 Kornit Digital Ltd Earnings Call
Okay.
Greetings and welcome to Pony did you don't start quarter 2022 earnings call.
As a reminder, this conference is being recorded.
I would now like to turn the conference Oh, what do I have Andrew Backman.
<unk> head of Investor Relations Mr. Backman, you may begin.
Thank you operator, good day, everyone and welcome to coordinate Digital's third quarter 2022 earnings Conference call. Joining me today are Chief Executive Officer Ronen Samuel.
Lori Hanover, Corning's, incoming chief financial Officer, and EMEA, <unk> EVP of corporate development and.
Unfortunately, along Rosener carnitas, CFO will not be joining us today due to the passing of a sister.
On behalf of everyone here at Kearney, we would like to extend our condolences and support to Alon and his family.
For today's call Ronan will recap results for the third quarter discuss the current market environment and review some of the actions we are taking to help successfully navigate the current market dynamics.
Laurie will then review the third quarter numbers and provide our fourth quarter outlook before we open it up for Q&A.
Before we begin I would like to remind you that forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, and other U S Securities laws will be made on this call.
These forward looking statements include but are not limited to statements relating to the company's objectives plans strategies statements of preliminary or projected results of operations or our financial condition and all statements that address these events and activities or developments that the company intends expects projects.
Please or anticipates will occur in the future.
Forward looking statements are subject to known and unknown risks and uncertainties and are based potentially on inaccurate assumptions that could cause results to differ materially from those expected or implied by the forward looking statements I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's annual report on form 20-F, followed by <unk>.
March 30, <unk> 2022, which.
Which identifies specific risk factors that could cause actual results or events to differ materially.
Any forward looking statements are made as of this call hereof and the company undertakes no obligation to publicly update or revise any forward looking statements 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 to the most directly comparable GAAP measures.
Can be found on the company's earnings release published today, which is posted on our website in the Investor Relations section at this time I would like to now turn the call over to Ronen Ronen.
Thank you Andy and good day everyone.
First want to Echo <unk> comments.
Send our deepest sympathies and condolences from everyone here at Coeur neat to a loan and his family for the recent loss of the system.
Everyone in our loan family continued strengths during this very difficult time.
As we reported this morning third quarter revenues were $66 8 million net of a bulk similarly, $5 6 million of noncash wounds impacts related to our global strategic accounts exceeding the revenue guidance range, we provided in August which as a reminder.
<unk> assumes zero impact from the fair value of issued warrants in the third quarter consumable and services revenue grew nicely from the second quarter and year over year due to the solid demand from our large strategic accounts as they gear up for the <unk>.
Peak season, as well as the execution of a major fleet upgrades to Atlas matched with a large strategic customer we continue to receive excellent feedback for our Max family of products from prospective customers and strategic accounts focusing on the excellent REIT.
<unk> quality and superior total cost of ownership that these systems deliver.
Macro related headwinds such as inflation general consumer sentiment and rising interest rates continued to impact our customers and prospects as they wait the impact on their projected based on goals in the coming quarters. These macro pressures result.
In longer sales cycle increase demand for bus financing options and an overall slowdown in new systems orders.
In Asia Pacific, we are facing the impact of a strong U S dollar, especially in Japan, and Korea, and we continue to feel headwind in China due to a zero Covid policy.
The long term opportunity ahead of us remain firmly intact and we continue to engage with large brands retailers major manufactures and e-commerce platforms focused on improving the operation lowering inventory levels and transforming their supply.
And by shifting production volume for mass offshore production to near show on demand sustainable production using coal needs digital solutions.
Since our inception <unk> has demonstrated its ability to transform and revolutionize the fashion and textile industry with sustainable on demand production solutions.
We continue to hear the need for shorter runs and shift to Neil and onshore production models from fashion brands retailers and digital platforms, we see the industry gradually transitioning from analog to digital and are receiving very good.
Good interest in our polo, the most comprehensive digital single step solution with Max quality and the lowest <unk> targeting screen mass production markets.
Despite the interest we've seen our recent NPD eyes, as well as the pipeline of potential business with existing and new accounts globally. We expect systems revenue to remain challenging for the next several quarters balance by healthy and growing contribution.
From consumable and service revenues.
Reminder, consumable revenues are seasonally lower in the first half of each year and traditionally build heading into our customer peak seasons.
We continue working closely with our global strategic accounts in the future global expansion plans and shipped the delay systems during this quarter.
Based on recent joint planning discussions we anticipate systems revenues from these accounts next year to start likely in the second quarter and heading into the peak seasons over the past several years, we build this business and our cost structure to be.
First of all at a materially higher revenue run rate in.
In July we took decisive actions in our operation, including a reduction in workforce to adjust to the market environment and reduce costs given our near term view of the economic backdrop and the impact on our business. We are taking additional steps to.
To reduce the company cost structure reallocating resources to emphasize areas with higher AOI and further adjusting our go to market initiatives in order to return to sustainable profitable growth.
We are a zillion company.
With a proven business model with <unk> balance sheet and remain committed to our long term vision and strategy.
Before I turn it over to Laurie I would like to invite everyone to read our second annual impact report issued a couple of weeks ago in conjunction with our participation at the printing United Trade show in Las Vegas.
We are very proud of our progress and our significant long term objectives.
And the report details the actions we are taking as a company.
And reinforces our commitment to transforming fashion and tech sales towards irresponsible.
<unk> low waste and eco friendly industry with that let me turn the call over to Laurie Laurie.
Thanks, Ronen and good day to everyone I'm happy to be joining you and stepping in for alone for this earnings call.
Third quarter revenues were $66 8 million net of a $5 6 million noncash warrant impact related to our global strategic accounts we.
We experienced solid demand for consumables from our key strategic accounts as they head into the peak season.
Service revenues grew sequentially and year over year due in part to a large north American customer who is completing the process of upgrading their entire fleet of Atlas to Atlas Lux.
Lastly system revenues rose sequentially and included delayed shipments of systems to a global strategic account.
As Rodney mentioned sales cycles for systems in the regions are lengthening.
While some customers waiting for more certainty in the macro picture others looking to buy systems are relying more heavily on financing, including extended payment terms as such we are currently exploring ways to assist qualified customers obtain financing and expand their businesses.
Moving to margins non-GAAP gross margin net of a five point warrants impact was 35, 6% compared with 47, 8% in the same period last year.
The lower year over year gross margin was driven primarily by significantly lower system revenues on a fixed cost infrastructure.
Inventory write offs for older generation systems as well as the impact of the stronger U S dollar in the EMEA region.
Looking forward, we anticipate gross margins in the fourth quarter to sequentially increase driven by a higher proportion of consumables in the sales mix.
Turning to expenses.
Third quarter non-GAAP operating expenses were $36 7 million down approximately 10% from $40 7 million in the second quarter.
The sequential decline was due to reduced levels of marketing activities. In addition to some benefit from the cost reduction and other expense management initiatives, we took in the third quarter.
We currently expect operating expenses in the fourth quarter to be lower as we further realize improvements to the cost structure offset in part by expenses associated with the printing United Trade show we attended in October .
non-GAAP operating loss was $13 million net of the $5 6 million noncash warrants impact, which was slightly better than our guidance for the quarter.
We ended the third quarter was 957 employees a year over year increase of 108, and a decrease of 52 employees from the previous quarter.
While the year over year increase mainly reflects the additions from the acquisition of to Soma. The sequential decline reflects the reduction in force we initiated in July .
non-GAAP net loss for the third quarter was $10 7 million or a loss of 21 per basic share.
Compared with non-GAAP net income of $11 5 million or <unk> 24 per diluted share in the same period last year.
Our cash balance, including bank deposits and marketable securities at quarter end was approximately $690 million with cash used in operations for the quarter of approximately $5 million.
As discussed on our last earnings call in August our board authorized a share repurchase program of up to $75 million, which as an Israeli based company is subject to receipt of Israeli court approval.
We have submitted our application to the court and as a reminder, expect the court approval process to take several months we.
We continue to believe that using a portion of the cash on our extremely strong balance sheet to repurchase shares is in the best interest of the company and our shareholders and that the share repurchase program will not impact our ability to execute on our growth initiatives.
Turning to fourth quarter guidance we.
We expect fourth quarter revenues to be between 66 and $70 million.
This outlook is consistent with what we provided on the third quarter earnings call in August .
We expect to have a higher mix of consumable revenues compared to the third quarter, which is typical for our business in the fourth quarter due to a customer's annual peak season.
We anticipate operating margins in the fourth quarter to be in the minus six to minus 10% range.
I want to remind everyone that all guidance provided today assumes zero impact from the fair value of issued warrants to our global strategic account.
And with that let me turn it back to Alan.
Thank you Lori now is the time to open the call for Q&A operator, Please open the call.
Thank you we will.
We'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the key.
If at any Daniel question have been accurate and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Jim Suva with Citi. Please go ahead.
Okay.
Thank you very much you mentioned that you are taking some additional actions.
To reduce some costs can you help us understand about kind of where those actions are because I believe now. This is the second round this quarter, our largest quarter. This year. So the second well. This year. We're just kind of wondering I guess the concern will be how will this affect.
Your strategy, our go to market, if anything or maybe its in some areas that we don't see all that from the external people like model like myself. Thank you.
Yeah, Jim Thank you Paul for your questions.
Call. It business was built in the model that we build are moving forward with.
Built on the higher revenue run rate has we see right now and then.
Q3 and Q.
Q4 in projecting the next day, we need to adjust our cost structure.
Did the adjustment as you mentioned in July some of it was a reduction in workforce.
The reductions that we're going to do right now is in specific projects that we prioritize them in a lower priority versus other projects. So first of all we re prioritizing projects and we're putting the emphasis on projects that we have higher return on investment.
And those projects that will bring return on investment also in 2023.
I'm going to go also into some workforce reductions, but I'm expecting it to be lower than what we have done in July .
On top of that there is a massive focus on gross margin.
A lot of initiatives that reduce cost on the on the on the Beaumont material.
Both on the hardware and supplies and services on spare parts that will contribute moving forward.
<unk> to gross margin.
It will impact the profitability of the companies. So those are the main areas that we are focusing in terms of the opex.
We are prioritizing things within project within R&D.
Testing activities within marketing and sales.
We are putting a lot of emphasize not to have the long term projection of the company in the long term strategy of the company. We believe in the long term strategy of the company. We believe that this company will continue to be back into growth into profitable growth. Our responsibility right now is two <unk>.
Focus and navigate the short term some bringing the company as well.
It is possible to have profitable growth in order to accelerate the growth moving forward based on our strategy.
Great. Thank you so much for the details it's greatly appreciated.
Thanks, Tim Operator next question please.
Your next question comes from Gary mainly with benchmark. Please go ahead.
Hey, good morning, guys. Thanks for taking the question.
First of all really sorry to hear the news along a lot of people that's another.
A replay please know that our thoughts and condolences are with you and your family.
Corona and Lori I know what Andy just two questions first one could you give us an update on the adoption from brand customers for the Atlas Presto and at Apollo and then a little bit more specifically on that top five fashion brand is that customer is going to be purchasing a kind of high volumes or is it more one offs for a specific product for a single facility.
Yes, so regarding the brands so first of all.
I'm very encouraged with the progress we see on the engagement with the brands and the adoption of the brands of the coordinate technology and the adoption of the brands of coordinating we see a lot of progress in many level of brands and when the same brands, meaning talk rent our retails are.
E Commerce.
And also entertainment Oh commerce.
We believe that these massive potential to grow with them.
We see several of them adopting the our technology, the Atlas and the Presto.
The main reason adopting our technology is because of the quality.
With the Max technology, which we deliver different level of quality actually we standardized now the quality and the marketing today.
Into the Max technology, with which received.
Very very well by by the brands by sensitive quality brands and.
This gave us a big edge and we bought the Max technology, not only to the Atlas will do to the Presto and later on we are bringing it also to the Apollo we are starting to get excellent feedback both film brands and for <unk>.
Having the polo and the potential to help them to move into onshore sustainable on demand production, what we see from brands is that them there.
Their interest is to move from off shore mass production into nearshore and onshore on demand production in a sustainable way, while enabling and.
Capabilities.
And by that they.
Have to use digital technology in the ft use co need because we are we are the only technology that bringing the level of quality that they are looking for so.
So as I mentioned I'm very.
With the focus that we are seeing right now with the engagement with our brands.
Got it thanks for all that and then just as a follow up Jim.
Just kind of on my apologies can you guys give us an update on just the MTI timeline in general and then more specifically on the active load automation of the Apollo I guess, what when do these release and then.
How much do you expect the kind of initial splash with customers to be versus the original expectations.
Yes, so we're.
We're getting as I mentioned excellent feedback both from our key customers strategic customers new prospects.
And in the end Paulo and also.
The brands and retailers.
We actually demonstrated.
In the classroom.
Few weeks back in printing United in Las Vegas.
To tens of customers prospective customers there.
Hello.
And the overall feedback was incredible.
We're super excited about the productivity the total cost of ownership the automation that this machine requires only one operator to run 400.
Our impression per hour.
And of course, the quality, the Max quality, which differentiate <unk> from all the risks.
We already signed few better customers actually can tell you we have aligned of customers that would like to be part of the better and we'd like to be.
So our introduction of the system. So we are very very happy with this engagement time will file key customers strategic customers.
Building the future plan based on that Paul talked about.
Now constructing already the future side based on the Apollo, but we are very encouraged not only growing selling their polo to existing customer for the enablement market of one off but we see a massive opportunity to sell the systems to the replacement market replace.
In the Canadian market and for the first time when it is bringing a quality that is better than the screen.
And with all the trends are moving onshore production initial production and shorter runs a polo is the perfect fit.
A replay screen for shorter runs.
In very high quality and sustainable way.
So we are very encourage next year will be in terms of time line, we are going to largely around eight months' timeframe. It might in June in Milan is a big show, we're going to introduce it.
And launch the product next year, we are planning to sell and install.
Dozens of those.
System.
But the scaling up of those systems will be in 'twenty 'twenty four.
And we have big plans on 2024 with the system.
Thanks, very much that's all for me.
Thanks to our operator next question please.
Okay.
Our next question comes from Tobey Sommer with Barclays. Please go ahead.
Hi, good afternoon, thanks for taking my questions.
I have two questions for colon then.
I guess I wanted to get a sense of the level of demand we're seeing across different end markets you mentioned.
With your customers.
No.
Very very choppy corporate to that quarter and you talked about the strong pipeline. We then.
I just wanted to focus as the other segments, but e-commerce include Peter.
Right.
What's the pushback right now is just really around timing.
Oh man.
And I guess my second one at the same time.
David.
We're talking about.
Optimization and everything.
You hear about costs.
And I kind of worry that perhaps.
We are less optimistic about top line growth.
Than you were before and I guess, we've got.
Concern warranted by any single arm.
<unk>.
Are we optimistic right now I guess.
When you see the inflection important points in terms of revenue growth.
Too soon to talk about.
Yes.
I'll try to answer your question I'm not sure I fully understand it.
Difficult to hear executive question. So first of all I would say that the encouraging news that we start to see we see a nice growth on the supplies on the ink side.
And I always said that this is the most important and numbers that we need to truck is the growth or indicate though that we need to truck as the growth of the supplies as you remember.
In Q1, and Q2, we will very worried because we saw some decline in some key customers.
And of course across the globe on the supplies and we were talking about all the <unk>.
Overcapacity.
What we start to see right now that with our key customers across the globe, we start to see growth on the ink side on the supply.
In EMEA, we see very very nice pools in Asia would be also a nice growth in America in our key customer we seek growth, including strong growth from our global strategic customers. So this is excellent indicators of course, it's too early to celebrate we need to wait.
For the peak season fixes and adjusting for the loss.
And it's the peak season will be strong as we started and I can tell you that the initial indications are very very nice form ordering of ink.
And then.
We believe that it will open the market a bit more for investment in new equipment next year.
Now what we see.
Is that the ink is growing services is growing very nicely and the slowdown that we are facing is mainly on new system sales and this is mainly due to the macroeconomics of the customers are standing and waiting to see how the macroeconomic will evolve the interest rate.
The inflation.
We are healthy customer with final thing, but it's very difficult today to get a.
Attractive financing for them from the banks. So many customers we see them are waiting.
We believe that.
System sales will be challenged in the next few quarters, because the macroeconomics as we see is going to be challenging in the first half of the year.
However longer term, we believe that it will.
Go back to normality and hopefully customers.
Well.
We stopped buying back.
Systems.
They used to do in the past.
What we expect in terms of.
Next year.
We see Q1 as.
What in terms of supplies business as you know we have.
Seasonality Q1 is the lowest one we also expect that.
The systems level of Q1 will be very similar or a bit lower than what we expect in Q4.
And regarding.
Global customer, we expect that they will start ordering new system, starting Q2, so we will start slow.
Next year.
But we will start seeing the growth into Q2 and definitely H two should be much stronger both from a supply.
Whereas services.
Also from new products that we're introducing we'll start influencing H two of next year.
Thank you Elena.
Thanks, Operator next question.
The next question comes from Brian Drab with William Blair. Please go ahead.
Hi, Thanks for taking the questions.
You talked about some good upgrade activity during the quarter.
In the past talked about potential.
Potential to upgrade.
Somewhere around 75% of the existing Atlas Fleet Atlas Matt.
Where are you now in terms of somewhere between zero and 75% and and also.
What do you what do you see in terms of upgrade activity going forward fourth quarter and then.
2023.
Great questions I would not be able to provide you exactly the numbers, but I'll give you the kind of the symptoms that were getting first of all we started it.
Slow on the upgrades as you'll remember at Q1, we change the configuration of the upgrades due to.
Cost reductions that we're doing and we wanted to reduce the time of that great.
But right now we have a very very nice pace.
With this quarter.
One of our key customers upgraded the entire fleet of atlas's.
A few tens of atlas's into Atlas after extensive test.
They sold.
The increase in productivity.
Of this upgrade in the in case of quality of course of the Max.
And they are very very pleased with that.
We already have a few other key customers order for next year, we've done the testing and we are planning to do the aggregate starting from Q1.
And some additional strategic customers that we are planning to start upgrading our mix.
So overall the feedback are very very positive and customers see the benefit of the cost the benefit of the production.
The productivity and the benefit of the quality and what we are going to see continued.
Continue to see the growth on the service revenue due to this.
A bit into next year, starting from Q1 onwards, we believe that we will be able to be in position to outgrow.
The 75% of the installed base.
We're in the mid of 'twenty 'twenty four.
Got it thanks, and then separately.
You have the active load automation upgrade, but I guess it will be ready.
Part of 2023 and <unk>.
Is that opportunity.
<unk> and what are you what are you hearing from customers in terms of interest in.
Purchasing that upgrade.
Okay.
Interesting point, because we had logic tool type of kit with the called MSS in the air.
The automation.
We are very much focusing right now on the MSS.
Which enable customers actually with one pallet.
To run different types of application different types of sizes of government.
It's very very efficient solution and we see a lot of interest from customers that are coming here to look at the MSS and testing it.
To install it in the entire fleet.
We and the intention is to release is MSS by end of Q1.
So we will start to see contribution in Q2 the next deal.
For the MSS and we believe that them.
Mass majority of.
Majority of our customer will.
Upgrade the system with the emphasis.
So the automation is still too early at this stage, we're evaluating again this solution.
We're looking into cost reduction on the solution.
We're working also on bringing the uptime of the solution to a different level.
Leveraging the solution already in their polo, the polo system will come with this automation.
On the first day.
Big Big benefit is for taking this automation into the atlases, we're still evaluating it and I don't have an exact date when we would go to the market with this solution.
Okay. Thank you.
Okay.
Great. Thanks, Brian Operator next question please.
Okay.
The next question comes from Jim Ricchiuti with Needham. Please go ahead.
Hi, Good morning, this is actually Chris <unk> on for Jim.
Thanks for taking the questions.
On gross margins you had started a few items that had contributed to the headwind there.
How did those components contribute.
What was the relative contributions of those components to the margin compression and could you expand on the nature of the inventory charge.
Yeah.
So.
Regarding the gross margins there were a few fewer.
Few impacts to the gross margin compare it year over year.
We're trying to analyze deeply and to get into all the details first of all is the volume.
Play and it's a fixed cost.
Once our what we see the drop in gross margin is mainly related to systems.
The ink gross margin looks good and the service gross margin.
Good the issue is system and it relates to volume fixed cost of our volume.
Of course, we're looking how we can reduce the fixed cost moving forward.
The other point is.
The impact of the currency.
Mainly in Europe . The strong dollar if you compare it year over year the impact of the stronger dollar is something like two 2%.
A negative contribution to the to the gross margin.
Of course.
Yeah.
The effects to the gross.
Margin.
Bill of materials.
Went up versus last year due to supply chain and other issues that we were facing.
During the Covid period.
There was another one timer impact of.
The write offs.
We write off this quarter.
Are you old systems that we are.
We are not planning to sell them.
Potentially we expect similar write off as well.
In Q4, we're still evaluating.
The impact of it.
So those are the main impact on the gross margin.
Expect in Q4 gross margin to be in a better place versus Q3, mainly due to the mix of supplies strong suppliers.
Q4.
And.
Also from a total mix both for system suppliers, we expect gross margin to be.
Longer we have.
Very high focus on improving gross margin moving forward.
As you know our long term gross margin plan is above the 50 and getting closer to the 55%.
Got it thank you.
Okay.
One more if I may.
Had mentioned potentially helping certain customers with financing what could that look like would that could that potentially take the form of a lease or some sort of charge based on usage. If you could just discuss that thank you.
So we are looking at different model is not cannot get into the details here I can tell you what we see in the market yet.
Many customers are going back to the banks and they find it difficult to financing.
To get financing, we see more and more customers.
Acquiring a better payment terms longer term payment terms.
In some cases.
With strong customers are we are facilitating it.
With some other cases, we're trying to help them to find financing outside.
Lowly, who joined us as our new CFO , putting a lot of focus on this area.
And we believe that in the next few weeks, we will have a few interesting programs in solution in this space, which we will address the market.
Got it. Thank you very much operator next question.
Thanks, Chris.
The next question comes from Chris Moore, with CJS Securities T. J S Securities excuse me. Please go ahead.
Right, Yeah, maybe just a question on the expense tightening.
I'm, just trying to figure where does Corning IDEXX development fit in terms of some of these further cost is that impacted at all.
So great question, a mountain kinetics I was.
Looking forward to get a question on kinetics guys.
<unk> is critical for our strategy for our future.
We are engaging with.
Hundreds of brands.
Market places ta to influences there.
They all love the idea of quantity.
This is a word that rainfall.
And right now we are focusing very much to establish coordinator.
And the establishment of a kinetics is building the geofence the global fulfillment network all around the world stabilizing the platform itself.
And walking with few major.
Demand generator to scale their business like the kind of off the wall like the weeks and few others Big one.
To scale, it and to make it successful.
2023 will be the year that will take those few projects into a different level and we believe that there from that point, we will be able to scale. This business.
To a totally different level.
Now coordinate X Gen. A few millions of dollars still not meaningful enough, but we need to differentiate between the direct contribution of course.
As the software we generate few millions of dollars to the indirect revenue that it generates to coordinate by selling more systems, Inc. And services I can tell you that there are many engagement with customers for fillers and brand.
Decided to useful neat and Dubai coordinate system.
To coordinate.
And they see a measure.
Potential and a major growth opportunity for them.
We see today's customers for fillers, accusing our system and we.
Directing routing jobs to them enjoying falling from this business and growing the business and investing more in our quality systems and so overall, we are very very.
Optimistic about the future of coordinate this is part of our strategy, we will continue to invest.
However, we are directing some of their budgets with specific projects next year, we would like to be very very focused next year, we'll be successful there.
And then to scale it further.
Perfect I'll leave it there thanks.
Yeah.
Thanks, Chris Operator, we have time for one more question. Please.
Our last question comes from Joe Greg Palm with Craig Hallum. Please go ahead.
Yes, Thanks for squeezing me in here.
I, just going going back to running your comments last quarter around your global strategic I think you mentioned.
Shipping additional systems in Q4, and Q1 and recognizing those systems I think in early 2023, it sounds like maybe that timeline has shifted a little bit. So can you confirm that and I.
I guess just in terms of visibility level.
There's something worsened or maybe you just have more confidence around the exact timing of that given what you said today.
Yeah. So first of all I can say that again, but the relationship with our global strategic accounts.
This is very strategic and a great relationship very open and we just met them few weeks back and were sitting on the Atlanta for 2023 and even beyond that.
They're very very close in that thing.
Our future product.
And their business is growing very very nicely.
So are we are working with them on the expansion plan.
As you saw in Q3, we delivered the systems that were delayed from Q2, and we mentioned that we will deliver them or in Q3 or in Q4, we deliver all of them in Q3.
Current expectation that the next delivery of systems.
It will be end of Q2 into Q3. So we believe that we will start seeing revenue in Q2, Q3, and Q4 or new system from this account next year.
Versus last year that it was mainly in Q1.
Okay. That's helpful and you know outside of that I'm. Just wondering if you can maybe just talk about your visibility levels and if you had to.
Some of these external factors being cost of financing.
Being you know macro pressures related to an underlying business versus just uncertainty.
What do you think sort of ranks highest in.
The culprit of lengthening sales cycles, you know order push outs et cetera.
Yes.
You know in the in the capital equipment, or whether you're selling kellet capital of half a million a million interest rate has a big.
Impact.
And we see the impact of the interest the uncertainty and the way. We went through you know what our customer were experiencing a year ago in the COVID-19. The boom of the E Commerce and then the normalization after the after.
After the Covid.
Make them a bit as it tends to understand how the end of the year will shape up.
So it's really really important to look at the big season to see the fixes and strong.
And this will definitely will drive customers to continue to invest in additional system.
Of course, we.
We are working to open new market segments are putting a lot of focus in.
The direct to fabric the replacement market.
Poorly all of those are new markets.
That we believe will contribute in 2023 and of course beyond that.
So I think it's overall sentiment.
Uncertainty of instead.
Instability in interest rates that are holding customer and they are waiting for the peak season to see how it would shape up.
Okay Fair enough best of luck going forward. Thanks.
Thank you very much thanks, Craig.
Mr. Backman as we have no further questions I'm going to be turning the call back over to you.
Great. Thank you operator, and thank you all for joining US today as always should you have any additional follow up questions. Please feel free to reach out to me directly. Thank you all and have a great day, operator could you. Please close the call.
The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.
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