Q3 2023 Kornit Digital Ltd Earnings Call

[music].

Speaker 1: Greetings and welcome to the corner digital start quarter of 2023 earnings conference call. As a reminder, this call is being recorded. I would now like to tell the conference over to our host, Mr. Jared Maiman, double head of investor relations for corner digital. Mr. Maiman, you may begin, so please go ahead. Thank you, operator. Good day, everyone. And welcome the Courtney Digital's third quarter of 2023 earnings conference call.

Greetings and welcome to the Quanta Digital's third quarter was 2023 earnings conference call.

As a reminder, this call is being recorded I would now like to turn the conference over to our host Mr. Jared name and global head of Investor Relations for Qantas Digital system. Amy you May begin Sir. Please go ahead. Thank you operator, good day, everyone and welcome to colony Digital's third quarter 2023 earnings Conference call.

Speaker 1: Joining me today are Chief Executive Officer Ronan Samuel, Lori Hanover, Courtney Chife

Joining me today are Chief Executive Officer Ronen Samuel.

Laurie Hangover corny Chief Financial Officer.

Speaker 1: and Amir Shaked Mandel, EVP of Corporate Development.

And the mere choquette mendell EVP of corporate development.

Speaker 1: For today's call, Roman will provide comments on the third quarter of 2023.

For today's call Ronan will provide comments on the third quarter of 2023.

Speaker 1: Lori will then review the third quarter numbers and provide our fourth quarter outlook before we open it up for Q&A.

Lori will then review the third quarter numbers and provide our fourth quarter outlook before we open it up for Q&A.

Speaker 1: 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.

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.

Other U S securities laws will be made on this call.

Speaker 1: These forward-looking statements include, but are not limited to, statements relating to the company's plans, strategies, projected results of operations, or financial conditions.

These forward looking statements include but are not limited to statements relating to the Companys plans strategies projected results of operations or financial condition.

Speaker 1: and all statements that address developments that the company expects will occur in the future.

And all statements that address developments at the company expects will occur in the future.

Speaker 1: Forward-looking statements are subject to known and unknown risks and uncertainties that could cause results to differ materially from those implied by the forward-looking statement.

Forward looking statements are subject to known and unknown risks and uncertainties that could cause results to differ materially from those implied by the forward looking statements.

Speaker 1: 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, filed with the SEC on March 30th of 2023, which identifies specific risk factors that could cause actual results to differ materially.

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 filed with the SEC on March 30th from 'twenty to 'twenty three which.

Which identifies specific risk factors that could cause actual results to differ materially.

Speaker 1: Any forward-looking statements are made currently, and the company undertakes no obligation to publicly update any forward-looking statements, except as required by law.

Any forward looking statements are made currently and the company undertakes no obligation to publicly update any forward looking statements, except as required by law.

Speaker 1: Additionally, the company will be making reference to certain non-GAAP financial measures on this call.

Additionally, the company will be making reference to certain non-GAAP financial measures on this call.

Speaker 1: The reconciliation of these non- GAAP financial measures to the most directly comparable GAAP measures can be found in the company's earnings release published today, which is also posted on the company's Investor Relations website.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the company's earnings release published today.

It is also posted on the company's Investor Relations website.

Speaker 1: At this time, I would now like to turn the call over to Ronan. Ronan?

At this time I would now like to turn the call over to Ron Anne Brennan.

Speaker 2: Thank Jared and thanks everyone for joining us on today's call. Before we go into our

Thanks, Jonathan and thanks, everyone for joining us on today's call.

Before we go into our third quarter results.

Speaker 2: I would like to take a moment to address the situation in Israel.

I would like to take a moment to address the situation in Israel.

Speaker 2: I am sure most of you are aware of the horrific events that have taken place in Israel over the past several weeks.

I'm sure.

Most of you are aware of no. We think events that have taken place in Israel over the past several weeks.

Speaker 2: I want to extend my deepest gratitude for the supportive messages we have received for many of you on this call.

I want to extend my deepest gratitude for the supportive messages. We have received for many of you on this call.

Speaker 2: letting us know that Kurnit is in your thoughts.

Letting us know that co neat is in your thoughts you'll support is greatly appreciated.

Speaker 2: Your support is greatly appreciated.

Speaker 2: I also want to stress to everyone that we are committed to the safety, security and well-being of our teams in Israel.

I also want to stress to everyone that we are committed to the safety security and wellbeing of our teams in Israel.

Speaker 2: Additionally, three weeks ago, we sent a letter to our customers emphasizing our commitment to continuity and telling them to expect no disruption in their daily interaction with Kornit.

Additionally, three weeks ago, we sent a letter to our customers emphasizing our commitment to continue at T and telling them to expect no disruption in their daily interaction with school neat.

Speaker 2: As of today, I am pleased to report that the situation in Israel has not materially impacted our business.

As of today I'm pleased to report that the situation in Israel has not materially impacted our business.

Speaker 2: We have also strategically bolstered our regional inventories to meet customer demands, not just for the upcoming peak season, but also for the first quarter of 2024.

We have also strategically bolstered our regional inventories to meet customer demand not just for the upcoming peak season, but also for the first quarter of 2024.

Speaker 2: As this complex situation continues to evolve, we pledge to remain proactive and implement contingencies as needed.

As this complex situation continues to evolve we pledged to remain active and implement contingencies as needed now.

Speaker 2: Now, let me talk about our third quarter results.

Now, let me talk about our third quarter results.

Speaker 2: Today, we reported revenues of $59.2 million, which is within the guidance range we provided in August .

Today, we reported revenues of $59 2 million, which is within the guidance range. We provided in August.

Speaker 2: As a reminder, this includes the impact of the Fair Value of Issues Warrant.

As a reminder, this includes the impact of the fair value of issues warrants.

Speaker 2: Despite a challenging macroeconomics environment, we continue to seek consumable sales growth.

Despite a challenging macroeconomic environment, we continue to see consumable sales growth in.

Speaker 2: Impressions also increased year-over-year, marking our third consecutive quarter of year-over-year impression growth.

Impressions also increased year over ear.

<unk>, our third consecutive quarter of year over impression growth.

Speaker 2: We anticipate continued growth in both impressions and consumable sales in the fourth quarter of 2023 and 2024.

We anticipate continued growth in both impressions and consumable sales in the fourth quarter of 2023 and 2024.

Speaker 2: However, the macroeconomic situation we saw in the first half of 2023, as continued in the second half, constraining system sales in the third quarter as was expected.

However, the macroeconomic situation we saw in the first half of 2023 is continuing to second half.

Training system sales in the third quarter as was expected.

Speaker 2: Despite these headwinds, system cells improve sequentially, as we continue to convert orders from itma.

Despite these headwinds ceased themselves improve sequentially as we continue to convert orders from each month.

Speaker 2: We also continue to focus on diversifying our customer base.

We also continue to focus on diversifying our customer base.

Speaker 2: selling our solution to new customers in key growth regions, including LATAM and Asia Pacific.

Selling our solution to new customers in key growth regions, including Latam and Asia Pacific and accelerating our growth into market segments like screen replacement and retail.

Speaker 2: and accelerating our walls into market segments like screen replacement and retail.

Speaker 2: We are encouraged to see new key customers leverage our technology in emerging applications, which we believe can generate meaningful growth for our systems and inks.

We are encouraged to see new key customers leverage our technology in emerging application, which we believe can generate meaningful growth for our systems and inks.

Speaker 2: Traditionally, these key customers have used analog technology but recognize the quality, capabilities and sustainabilities of our digital solution.

Additionally, these key customers have used analog technology, but recognize the quality capabilities and sustainability of our digital solutions.

Speaker 2: Additionally, we continue to see growth in our direct-to-fabric technology, as evidenced by Q3 being one of the strongest quarters for Presto system cells.

Additionally, we continue to see growth in our direct to fabric technology.

Evidenced by Q3 being one of the strongest quarters for Bristow system cells.

Speaker 2: We also saw additional upgrades to Max in Q3.

We also saw additional upgrades to Max in Q3 as.

Speaker 2: as customers continue to see the value of our MAX technology, which includes enhanced quality, durability, and productivity.

As customers continue to see the value of our Max technology, which includes enhanced quality durability and productivity.

Speaker 2: Following the upcoming peak season in Q4, we anticipate average momentum to resume in 2024.

Following the upcoming peak season in Q4, we anticipate a build momentum to resume in 2024.

Speaker 2: We are seeing strong interest for the Atlas Max Poly in the sports and athleisure market.

We are seeing strong interest for the Atlas Max poorly in the sports and leisure market.

Speaker 2: In October , we attended Printing United in Atlanta, where we built additional momentum for this solution.

In October we attended printing United in Atlanta, where we built additional momentum for this solution.

Speaker 2: Our customers are most excited about the system quality and vibrancy when printing on synthetic, natural and blended fabrics.

Our customers are most excited about the system quality and vibrancy when printing on synthetic natural and blended fabrics.

Speaker 2: Moving on to the Apollo. Q3 was the first quarter where initial better systems were installed and operational.

Moving on to the Apollo Q3 was the first quarter, where our initial better systems were installed and operational the feedback we have received from our customers is highly encouraging and we have seen strong indications on systems uptime yield quality and.

Speaker 2: The feedback we have received from our customers is highly encouraging. And we have seen strong indications on systems uptime, yield, quality and unique economics. As of today, we have three systems installed in North America, and we expect this system to be fully operational for the coming fixes.

Unit economics as of today, we have three systems installed in North America, and we expect these systems to be fully operational for the coming peak season, we continue to target general availability for the Pollo in the first quarter of 2024, and we are building a good pipeline.

Speaker 2: We continue to target general availability for the Apollo in the first quarter of 2024 and we are building a good pipeline of existing and new customers.

<unk> of existing and new customers.

Speaker 2: In summary, this quarter we saw a continuation of macroeconomics headwinds. However, we were able to further diversify our customer base, expand into key textile production regions, and pursue growth opportunities in new applications.

In summary, this quarter, we saw a continuation of macroeconomic headwinds.

However, we were able to further diversify our customer base expand into key textile production regions and pursue growth opportunities in new applications.

Speaker 2: Looking ahead, we will continue to take proactive measures to resume sales growth while also focusing on enhancing operating efficiencies across our entire company. Our plan is still to approach break-even on an adjusted EBITDA basis during the fourth quarter.

Looking ahead, we will continue to take proactive measures to resume sales growth, while also focusing on enhancing operating efficiencies across our entire company. Our plan is still to approach breakeven on an adjusted EBITDA basis doing the.

Fourth quarter.

Speaker 2: and grow positively in 2024.

And golf, possibly in 2024.

Speaker 2: Now let me turn the call over to Lori for a closer look to our third quarter financials and fourth quarter guidance. Lori.

Now, let me turn the call over to lowly foreclosure look to our third quarter financials and fourth quarter guidance lower.

Speaker 3: Thank you, Ronen, and good day to everyone. As Ronen mentioned, third quarter revenues were $59.2 million within the guidance range that we provided in August .

Thank you ronen and good day to everyone as Ronen mentioned third quarter revenues were $59 2 million within the guidance range that we provided in August.

Speaker 3: We saw revenue growth in consumables during the quarter, both year over year and sequentially.

We saw revenue growth in consumables during the quarter, both year over year and sequentially.

Speaker 3: Services sales declined slightly year over year due to significant upgrade activity from a key customer in the comparable quarter of 2022.

Services sales declined slightly year over year due to significant upgrade activity from a key customer in the comparable quarter of 2022.

Speaker 3: As anticipated, system sales were once again lower on a year-over-year basis, but were much improved sequentially as we continued to convert orders from ITMA.

As anticipated system sales were once again lower on a year over year basis, but were much improved sequentially as we continue to convert orders from its Matt.

Speaker 3: Excluding purchases in EMEA from our global strategic account, system sales were up year over year.

Excluding purchases in EMEA from a global strategic account system sales were up year over year.

Speaker 3: In the Americas, year-over-year growth was driven by strong system sales in Latin America following ITMA.

In the Americas year over year growth was driven by strong system sales in Latin America following its Matt in it.

Speaker 3: In EMEA, consumables revenue grew nicely as utilization rose and upgrades to max continued.

EMEA consumables revenue grew nicely as utilization rose and upgrades to Max continued.

Speaker 3: Turning to APAC, sales were flat compared with the same period last year. As Ronen described earlier, we continue to develop a meaningful pipeline of long-term opportunities in this region.

Turning to APAC sales were flat compared with the same period last year.

As Ron described earlier, we continue to develop a meaningful pipeline of long term opportunities in this region.

Speaker 3: Moving to margins. non-GAAP gross margin was 37.4% compared with 35.5% in the same period last year.

Moving to margins non-GAAP gross margin was 37, 4% compared with 35, 5% in the same period last year.

Speaker 3: The year-over-year improvement is due primarily to comparatively higher margin consumables representing a greater portion of total revenues.

The year over year improvement is due primarily to comparatively higher margin consumables, representing a greater portion of total revenues. We continue to expect gross margin improvement for the balance of this year as consumables typically comprised the highest percentage of sales in the fourth quarter.

Speaker 3: We continue to expect gross margin improvement for the balance of this year as consumables typically comprise the highest percentage of sales in the fourth quarter.

Speaker 3: Looking at expenses, total third quarter non-GAP operating expenses with 31.1 million, a decrease of 15% from 36.7 million in the same period last year, and down 9% from 34.1 million last quarter. This year over year improvement in expenses reflects the benefit of our active cost savings efforts, which includes our previously completed workforce reduction.

Looking at expenses total third quarter non-GAAP operating expenses were $31 1 million a decrease of 15% from $36 7 million in the same period last year and down 9% from $34 1 million last quarter.

This year over year improvement in expenses reflects the benefit of our active cost savings efforts, which includes our previously completed workforce reductions.

Speaker 3: The sequential improvement primarily reflects lower expenses attributable to our participation at the ITMA trade show, which as a reminder, was a Q2 event.

The sequential improvement primarily reflects lower expenses attributable to our participation at the <unk> trade show, which as a reminder, it was a Q2 event.

Speaker 3: All of this resulted in an adjusted EBITDA loss for the third quarter of 2023 of $5.6 million, a significant improvement compared with the adjusted EBITDA loss of $10.5 million in the same period last year and the adjusted EBITDA loss of $10.7 million just last quarter.

All of this resulted in an adjusted EBITDA loss for the third quarter of 2023, a $5 6 million a significant improvement compared with the adjusted EBITDA loss of $10 5 million in the same period last year and the adjusted EBITDA loss of $10 7 million just last quarter.

Speaker 3: Adjusted EBITDA margin for the third quarter of 2023 was negative 9.5 percent, again, within the guidance range we provided in August and reflects a substantial improvement both year over year and sequentially.

Adjusted EBITDA margin for the third quarter of 2023 was negative 9.5% again within the guidance range. We provided in August and reflects the substantial improvement both year over year and sequentially.

Speaker 3: Our cash balance, including bank deposits and marketable securities at quarter end, was approximately $569 million. Cash used in operations during the third quarter was $7.7 million, driven primarily by the operating loss and changes in working capital.

Our cash balance, including bank deposits and marketable securities at quarter end was approximately $569 million cash.

Cash used in operations during the third quarter was $7 7 million driven primarily by the operating loss and changes in working capital.

Speaker 3: Accounts receivable increase due in part to a higher balance of extended payment terms related mainly to converted deals from Ithma.

Accounts receivable increased due in part to a higher balance of extended payment terms related mainly to converted deals from aetna.

Speaker 3: Other prospective customers are being directed to financing partners, including two new partners recently onboarded for extended payment plans.

Other prospective customers are being directed to financing partners, including two new partners recently on boarded for an extended payment plans.

Speaker 3: Inventories declined sequentially. We continue to remain focused on improving working capital to drive cash conversion.

Inventories declined sequentially, we continue to remain focused on improving working capital to drive cash conversion.

Speaker 3: Since the beginning of the year, we have repurchased approximately 1.6 million shares under our Share Repurchase Program for an aggregate amount of $36.8 million, representing an average price paid per share of $22.97.

Since the beginning of the year, we have repurchased approximately one 6 million shares under our share repurchase program for an aggregate amount of $36 8 million, representing an average price paid per share of $22 97.

Speaker 3: The unused balance of our previously announced share repurchase program is approximately 38 million. We plan to be more aggressive in our repurchasing efforts given our current enterprise value.

Unused balance of our previously announced share repurchase program is approximately $38 million, we plan to be more aggressive in our repurchasing efforts given our current enterprise value.

Turning to fourth quarter guidance.

Speaker 3: As we discussed last quarter, we continue to plan to approach break even on an adjusted EBITDA basis in the fourth quarter.

As we discussed last quarter, we continue to plan to approach breakeven on an adjusted EBITDA basis in the fourth quarter. We currently expect revenues for the fourth quarter of 2023 to be between 55 million and $60 million and adjusted EBITDA margin to be in the negative 6% to zero per.

Speaker 3: We currently expect revenues for the fourth quarter of 2023 to be between $55 million and $60 million, and adjusted EBITDA margin to be in the negative 6% to 0% range. As a reminder, the guidance for revenue and adjusted EBITDA margin includes the impact of the non-cash expense associated with the fair value of the company's warrants to our largest global strategic account.

<unk> as a reminder, the guidance for revenue and adjusted EBITDA margin includes the impact of the noncash expense associated with the fair value of the company's warrants to our largest global strategic account.

Speaker 3: As Ronan noted earlier, while the pipeline we have built for our solutions coming out of Ipma and printing United is encouraging, we continue to see macro headwinds weighing on our sales cycle.

As Ron had noted earlier, while the pipeline we have built for our solutions coming out of Itamar and printing United is encouraging we continue to see macro headwinds weighing on our sales cycle.

Speaker 3: As we move into 2024, we anticipate that our customers will likely face similar pressures to those experience during 2023.

As we move into 2024, we anticipate that our customers will likely face similar pressures to those experienced during 2023.

Speaker 3: These headwinds include constrained CapEx budgets, high interest rates, and difficulty in securing financing.

These headwinds include constrained capex budgets high interest rates and difficulty in securing financing Sim.

Speaker 3: Similarly, we see rising risks to discretionary consumer spending, stemming from tightening credit, rising rates, higher energy prices, and other such factors.

Similarly, we see rising risks to discretionary consumer spending stemming from tightening credit rising rates higher energy prices and other such factors.

Speaker 3: The spending behavior of the end consumer, therefore, could impact the investments our customers are willing to make.

The spending behavior of the end consumer therefore can impact the investments our customers are willing to make.

Speaker 3: To date, in 2023, we have worked closely with our key customers to mitigate some of their challenges, while also focusing on improving our own operating model. We have reduced costs and reallocated resources towards long-term opportunities with the goal of generating improved returns on invested capital.

To date in 2023, we have worked closely with our key customers to mitigate some of their challenges while also focusing on improving our own operating model, we have reduced costs and reallocated resources towards long term opportunities with the goal of generating improved returns on invested capital.

Speaker 3: In 2024, we will continue to proactively work with our customers, invest in our product roadmap as planned, and improve our operating model.

In 2024, we will continue to proactively work with our customers invest in our product roadmap as planned and improve our operating model.

Speaker 3: We are therefore planning to deliver profitable growth for the full year 2024 on an adjusted EVDA base.

We are therefore planning to deliver profitable growth for the full year 2024 on an adjusted EBITDA basis.

Speaker 3: clarify, our 2024 plan considers the typical seasonality inherent in our business model, which implies that revenue and adjusted EBITDA margin will be stronger in the second half of 2024 as compared to the first half of 2024.

To clarify our 2024 plan considers a typical seasonality inherent in our business model, which implies that revenue and adjusted EBITDA margin will be stronger in the second half of 2024 as compared to the first half of 2024.

Speaker 3: That concludes our prepared remarks. And with that, I will now turn it back over to Ronen to open up the call for Q&A. Ronen?

That concludes our prepared remarks, and with that I will now turn it back over to Ronan to open up the call for Q&A Ronan.

Speaker 2: Thank you, Laurie. And for that operator, we are ready to open the call for Q&A.

Thank you Laurie and for that operator, we are ready to open the call for Q&A.

Thank you Sir.

Speaker 4: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad.

Ladies and gentlemen, we will now be conducting a question and answer session.

I would like to ask a question. Please press star and then one on your telephone keypad.

Speaker 4: confirmation talent will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, maybe necessary to pick up your handsets for whole pressing the star.

A confirmation tone will indicate your line is in the question queue.

You May press Star and then two if you would like to remove your question from the queue.

For participants using speaker equipment may be necessary to pick up your handset before pressing the star key.

Speaker 4: Again, if you would like to ask a question, please press star and then one.

Again, if you would like to ask a question. Please press star and then one.

Okay.

Speaker 4: The fourth question we have comes from Greg Palm from Kurg Helleman capsule group. Please go ahead.

The first question, we have comes from Greg Palm from Craig Hallum Capital Group.

Please go ahead.

Speaker 5: Yeah, thanks. Hey everyone, just first off, wanted to offer my continued support and sympathies for all of you and all of Corneet employees and everyone in Israel. So, you know, with that said, can you just talk a little bit about, you know, contingency plans, you know, in light of everything going on? I think you alluded to building some inventories regionally, but what other steps have you taken or will you take in the coming months?

Yeah, Thanks, Hey.

Hey, everyone. Just first off I wanted to offer my continued supporting sympathies for all of you and all cornea it employees and everyone and in Israel. So you know you know what that said can you just talk a little bit about you know contingency plans you know in light of everything going on I think you alluded to building some inventories regionally.

But what other steps that you've taken or will you take in the coming months.

Speaker 6: Thanks for the question and supportive comments. Before I start talking about the contingency plan, just to remind everyone yesterday, it was exactly one month of the horrific event that happened in Israel where more than 1,500 people were slaughtered, many of them children and elderly, and more than 250 people were hostages.

Thanks, Sue Thanks, Gregg for the question and supportive comments.

Before I start talking about the contingency plan just to remind everyone yesterday it was.

Exactly one month, so still we think is there.

That happened in Israel.

More than 1500 people were slaughtered.

Many of them children and older.

And more than 250 people were hostages, it's still hostages.

Speaker 6: still hostages. And thousands of missiles were shooting all over Israel.

And thousands of me says we're shooting all over Israel.

Speaker 6: We are still dealing with this situation with two primary focus areas. One is the well-being of our employees and supporting the community of the Israeli employees and their families. We have 10 employees, but their families were directly impacted by this horrific event.

We are still dealing with the situation.

With two primary focus areas, one is the well being of our employees.

And supporting the community of the Israeli employees and their families.

We have.

10 employees.

The families were directly impacted by this always pick a event.

Speaker 6: and supporting them and also other employees that now serve in the Army.

And supporting them and also.

The employees that are serving in the army.

Speaker 6: And of course in parallel we are putting a major focus on full business continuity.

And of course in parallel we are putting a major focus on full business continuity.

Speaker 6: From the first day, our England was in full operation. Happy to say that I still in full operation and we don't see any impacts impact to the production in parallel. We immediately shipped all the needed

From the first day of England was in full operation.

Happy to say that that is still in full operation and we don't see any.

Impact to the production in parallel.

We immediately shipped all the needed ink supplies and spare parts to the regions to be close to the customers and to be ready for the peak season at this moment, we actually shipping all the consumables and.

Speaker 6: Inc, supplies and spare parts to the regions to be close to the customers and to be ready for the peak season. At this moment we are actually shipping all the consumer volts and the spare parts already for Q1 and our implant is full production.

Spare parts already for Q1, and Oh, England is full production.

Speaker 6: Our contact manufacturers are global companies and they are fully in production and we don't see any issue.

<unk> manufactures are global companies and are fully in production and we don't see any issue in parallel we have a strong and clear contingency plans.

Speaker 6: In parallel we have a strong and clear contingency plan in place in case that we need to move production out of Israel if necessary.

In place in case that we will need to move production out of Israel if necessary.

Speaker 6: So we are working very, very closely with our customers. We send them email, explain the situation already three weeks back and from that moment we updating them on a weekly basis. And they know that they have their in-speur paths and even systems if they need in the regions. And we are committed that they will not feel any impact to has

So we are working very very closely with our customers, we send them email explaining the situation already three weeks back and from that moment, we updating them on a monthly basis.

And they know that they have the inc. Spare parts and even systems if they need.

In the regions and we are we are committed that they would not feel any impact to their businesses.

Speaker 5: Okay, well I appreciate all that color. I guess my second question has to do with kind of your visibility into 2024 at this point. You made some comments. There's clearly a lot of things outside of your control, but I also think there's some company specific drivers as well, whether that's new products like Apollo, you've got maybe an accelerated upgrade.

Okay, well I appreciate all that.

Color I guess my second question has to do with kind of your visibility and the 'twenty 'twenty four at this point you made some comments theres clearly a lot of things outside of your control, but you know I also think there's some company specific drivers you know as well, whether that's new products like Apollo you've got you know.

Maybe an accelerated upgrade cycle, the Max pipeline conversions for <unk>, so it sounds like you're still.

Speaker 5: cycle the max pipeline conversions for MIPMA. So it sounds like you're still committed to growing in 2024, but can you give us a little bit of more color on kind of what those expectations might be?

We're committed to growing in 'twenty 'twenty, four but can you give us a little bit of a more color on kind of what those expectations might be.

Speaker 6: Yeah, so before going down to the bottom line, how do we seek you for? Let me give you the background. Of course, we're all familiar with the macro economic headwind that we all suffering, interest rate is high, it's very difficult to get financing and self-cycle being longer and customer delay decision in many of them delay decision after the fixes.

Yeah, so before going down to the bottom line, how do we see Q4, let me give you the background of course, we're all familiar with the macro economic headwinds that are we all suffer.

Suffering interest rate is it is high it's very difficult to get financing.

And cell cycle being longer in customers delayed decision and many of them delayed decision after the peak season.

Speaker 6: from a more make-up perspective of the textile industry and what we see on our industry, we see the more continued momentum into the move of production from offshore to near-shore and to onshore is very visible. Everybody's seeing it, our customers seeing it, if it's the fulfiller, but also brands and retailers moving production directly onshore. And it's a drive-over for our business.

For men and more make whole perspective of the textile industry and what we see on our industry. We see the continued momentum into the move of production from offshore to nearshore and onshore is very visible everybody is seeing our customers seeing it if it's there.

Fulfill but also brands and retailers moving production directly own show and it's a it's a driver of growth for our business on demand is now everybody is talking about it.

Speaker 6: Only man is now, everybody is talking about it.

Speaker 6: And sustainability is a major issue that the brands needs to report on how they produce the products. And overall, they are still having high inventory and in order to reduce the inventory, they have to move into on-demand products.

And eh.

Sustainability is a major issue that the brand needs to report on how they produce the products and overall, they're still having high inventory in order to reduce the inventories they have two moving to on demand production.

Speaker 6: When we are looking at our customer base, it's already the third quarters in a row that we see inks grow. We see ink grow across the board. We see also the impression growing. And also very important is the improved utilization of systems across the fleet. This is a very, very good indication of the health of the business of our customers.

When we're looking at the customer base, it's already the third quarters in a row that we see inks grow.

We see equal across the board, we see also the impression boring.

And also very important is the improved utilization of systems across the fleet. This is a very very good indication.

Of the health of the business of our customers.

Speaker 6: In terms of the portfolio, we have by far the strongest portfolio ever. Mass technology is continued to be the mainstream and this is the new standard of the industry. We had in Q3 many upgrades and we expected the upgrades will continue after the peak season into Q1 2024 from Atlas to Atlas Mark.

In terms of the portfolio, we have by far the strongest portfolio ever.

<unk> technology has continued to be the main stream and this is the new standard of the industry. We had in Q3, our many upgrades and we expect that the upgrades will continue after the peak season into Q.

Q1, 2024 from Atlas Atlas the MX.

Speaker 6: Our press tomats, it was a very strong, actually the strongest quarter ever for the press to coming out of Itma and also other activities that we had in the...

Our way of Presto marks it was a very strong actually the strongest quarter ever for the peso coming out of <unk> and also and other activities that we had in the in the in there.

Speaker 6: doing two, three, suppress Tomax was a very strong sales. Another indication of new products that we've released to the market last year is the Atlas Max poly. Finally, we see traction on the Atlas Max poly. Actually, it was the strongest quarter for the Atlas Max poly and selling those products to mainly that leisure and sports market. it very good.

During Q3, so first of March was a very strong sales another indication of our new products that we've released to the market last year is the access Max Bali. Finally, we see production on the Atlas smacks fully actually it was the strongest quarter for the Atlas Poly and <unk>.

Those are products to maiden in depth leisure and sport market.

A very good indication.

Speaker 6: If I would say that the best indication that we have is that diversity in our business.

If I would say that the best indications that we have is the diversity in our business. We are really putting a lot of focus on diversifying our customer base.

Speaker 6: We really put in a lot of focus on diversifying our customer base.

Speaker 6: We are entering more and more into the mainstream screen markets across the board. Some major players that used to do it on analog, now moving it to digital, using the max technology and some of them are using the Apollo and we'll use it more and more. And I will touch on the Apollo in a minute.

More and more into the mainstream mainstream screen market.

Across the board and some major players that used to do it in analog now moving into digital.

Using the <unk> technology and some of them are using the Apollo and we'll use it.

More and more and I will touch on that following a minute.

Speaker 6: We see that the classification echoes geographies. La Tam was a very strong quarter for La Tam in Q3 and we are entering Q4 with continued momentum for La Tam.

We see a diversification across geographies and Latam was a very strong quarter for full autonomy in Q3, and we are entering Q4 with continued momentum for Latam.

Speaker 6: We see new markets that develop for us like India. A very strong market. We're entering there to some of the biggest fulfilled textile manufacture of the world. We installed one of the

We see new market, that's developing for us like India, a strong is very strong market, we're entering that well.

Some of the biggest fulfilled a textile manufacture of the world we.

We installed two one of the biggest textile manufacturer in India. This quarter with installer Presto, and we expect them to continue to grow and adding more capacity. We can see the major part of our business is coming actually from the retailers and brands that are adopting out.

Speaker 6: textile manufacturing in India, this quarter with the internet presto and we expect them to continue to grow and adding more capacity. We can see that major part of our business is coming actually from retailers and brands that are adopting our technology and buying systems or producing through cornit X on the global fulfillment.

Technology and buying systems, all producing Foucault need X one the global fulfillment network.

Speaker 6: We are asking percentage, we have a very high percentage of net new customers, very versus existing customers, that bind new system, we saw it in the last few quarter and evidence in Q3 and we expect the same in Q4.

Actually in percentage, we have a very high percentage of net new customers, a very versus existing customers are buying new systems. We saw it in the last few quarters. That's evidence in Q3, and we expect the same in Q4.

Speaker 6: As for the Apollo, we are in the middle of the beta. We are already in total three systems in North America. And the indication of very positive from all those three beta, the see the values of the Apollo in terms of productivity.

As for their Paulo, we are in the middle of the better we already installed three systems in North America.

And the indications are very positive from all those three better they see the values of their follow in terms of productivity in terms of print qualities in terms of donation, what they're all saying that and made that one operator can run the system at full capacity of 400 T shirts that government.

Speaker 6: in terms of print quality, in terms of automation.

Speaker 6: What they're all saying, they're amazed that one operator can run the system at full capacity of 400 T-shirts per hour or a government per hour.

Speaker 6: Another big advantage that we are hearing from them is that they reduce consumption and energy.

Our and another big advantage that we are hearing from them is that they reduced consumption of energy on the system, which and in the tier which are reduced.

Speaker 6: on the system, which is in the dryer, which reduce the consumption of energy by about 40%. Major advantages. We...

Consumption of energy by about 40%.

Major advantages we can see.

Speaker 6: and that the final and opportunities are getting stronger for the Apollo. 2024 will be the year that we will ramp up the Apollo. We are going to commercially release it in Q1 and we are going to ramp up it in doing the year and the accelerated growth of the Apollo will be in 2025.

The final and the opportunities are good.

Getting stronger a full day of polo.

2024 will be the year that we will ramp up there, although we're going to commercially released it in Q1, and we are going to ramp up it in doing the ear and the accelerated growth of their polo will be in 2025. So overall, we are very very excited on that Paul.

Speaker 6: So overall we are very, very excited on their polo and we are starting to convert opportunities that we have into still.

Hello, and we are starting to convert opportunities that we have into sales.

Speaker 6: As for 2024, as I mentioned, our view is based on the current macro economics that we see today. As far we believe that we need to be

As for 2024 as I mentioned, our view is based on the current macro economics that we see today.

We believe that we need to be.

Speaker 6: We need to take the current situation and focus on the revenue and modus possibility for 2024. But we are seeing some upside opportunities ahead of us into 2024 that didn't touch.

And very Oh, we need to take the current situation and forecast a modest schools.

On the on revenue and modest profitability for 2024.

But we are seeing some upside opportunities ahead of us into 2024 that didn't touch one of the opportunities for example, the potential upgrades of our global strategic customers from their atlas's to address market currently with you.

Speaker 6: One of the opportunities, for example, the potential upgrades for global strategic customers from their adversaries to adversaries marks that currently we didn't take it into their account.

It didn't take it into the account there's other opportunities like we have entered into some exciting new markets and application as I mentioned on previous calls we are working with some of our biggest brands of the world that connecting us with therefore fillers.

Speaker 6: There are other opportunities like we are entering to some exciting new market.

Speaker 6: and application. As I mentioned on previous call, we are working with some of the biggest brands of the world that connecting us with their full fillers.

Speaker 6: Some of them in China, in Vietnam, in Korea, and we see a big potential to get into a new application, a new market segment through it.

Some of them in China in the in Vietnam.

Korea.

And we see a big potential to get into a new application or new market segments through it you already installed fuel systems adult customers, but.

Speaker 6: We already installed few systems and those customers that now they are testing

But now they are testing it and potentially it can be a growth engine again, we didn't take it into account. So we are looking at 2024 more format Conservative Airport and we expect modest growth in revenue and.

Speaker 6: and potentially it can be a gold engine. Again, we didn't take it into account.

Speaker 6: So we are looking at 2024 more from a conservative approach and we expect modest growth in revenue and to become profitable in a modest way.

To become profitable in a modest way.

Speaker 5: Okay, appreciate all that I will hop back in the Q-thanks.

Okay I appreciate all that I will hop back in the queue. Thanks.

[laughter].

Speaker 4: Thank you. The next question we have comes from Brian Draft from William Blair. Please go ahead.

Thank you. The next question we have comes from Brian Drab with William Blair. Please go ahead.

Speaker 7: Hi, thanks for taking my questions. Um, Ronan, you know, we've spoken about this. You know, you and the team have my support and really sorry for everything that you're going through in this situation.

Hi, Thanks for taking my questions, but running it well.

We've spoken about this.

You and the team have my support and I'm really sorry for everything that youre going through in this situation.

Speaker 7: That said, I have to ask some questions here. So, on the upgrades.

Hum.

That said I have to ask some questions here so.

And on the upgrades.

Speaker 7: You, you just mentioned that you're still hopeful that the large strategic account might upgrade to max. Have you learned anything between the last time you spoke to everyone and today?

You just mentioned that.

Youre still hopeful that the large strategic account might upgrade to Max have you learned anything between the last time, you spoke to everyone and today.

Speaker 7: that would give you more or less confidence at that. It is a possibility for 24.

That will give you more or less confidence that that is a possibility for 'twenty four.

Speaker 6: Yeah, so thanks Brian again for the supportive messages. And has for our strategic global strategic customers there's limited information that I can share, but I can tell you that only in the last few months we met several times together, not only about the max upgrades. We have a very close relationship and we are talking about the plans for next year and even beyond that.

Yeah. So thanks again for the supportive messages.

And has $4 strategic global strategic customers, There's limited information I can share, but I can tell you that only in the last few months, we've met several times together not only about the MX upgrade so we have a very close relationship.

We are talking about the plan for next year and even beyond that.

Speaker 6: The maths, of course, was evaluated as I mentioned before, and our strategic, our global strategic, they see the value. They still, we are still waiting for decision, final decision from their perspective. But as I mentioned, we are not counting on it. It can be in 2024. It can be after, so we cannot put it at this stage in the plan.

The Max of course was evaluated as I've mentioned before and Oh strategic a global strategic they see the value. They still I mean, we are still waiting for a decision final decision from their perspective, but as I mentioned, we are not counting on it.

It can be in 2020 for it can be after so we cannot put it at this stage in the plan on top of that of course, we are working in different angle with them as I mentioned before they are going to have that Paulo doing 2024 are going to test it out at.

Speaker 6: On top of that, of course, we are working in different angle with them. As I mentioned before, they are going to have their Apollo doing 2024. They're going to test it. At this stage, I'm very excited about the future of the Apollo. We knew their operation. And we believe that 2025 will see multiple Apollo's within this strategic customers.

At this stage are very excited about the future of their polo within their operation and we believe that 2025, we will see.

Multiple of falls within this.

And strategic customers overall, the business is doing well that continues to grow and in Q3, where we install all of the systems that we have shipped a loss data in 2022. So now those systems are rarely if at all there.

Speaker 6: Overall, the business is doing well, they continue to grow, and in Q3 we installed all the systems that we have shipped.

Speaker 6: uh last year in 2022 so now those systems are really ready for fully operational for the peak season and of course we'll see some benefit on the on the on the supplies on the ink from their side

For fully operational for the peak season and of course, we will see some benefit on the on.

On the supplies on the ink from.

From their side.

Speaker 6: And as I mentioned, we are working on potential expansion, but at this stage, we are not taking into account in our plan for 2024 any material investment, additional investment in capital in formal strategic locations.

And as I mentioned, we are walking on potential expansion, but at this stage, we are not taking into account in our plans for 2020 for any material investment additional investment in capital are in formal strategic local accounts.

Speaker 7: Okay, thanks for that. And then can you say anything about, you know, what you've seen so far in the fourth quarter, you know, since October 1st, in terms of impressions system utilization.

Yeah.

Okay. Thanks for that.

And then can you say anything about.

What you've seen so far in the fourth quarter. So as you know since October 1st in terms of our impressions.

Impressions system utilization.

Speaker 7: just to give us a sense for what you're seeing as far as early signs of the holidays season.

Just to give us a sense for what youre seeing as far as the early signs of the holiday season.

Speaker 6: Yeah, so of course we are monitoring very very closely now on a daily basis. We actually see a very promising growth.

Yeah. So of course, we are monitoring very very closely now on a daily basis are we actually see a very promising growth both.

Speaker 6: both on the ink sides and on the impressions across the boat. So when we're talking to our customers they're very optimistic.

Both on the ink side and on the impressions across the board. So when we're talking to our customers are very optimistic about Q4 I'm the ordering the supplies and we can see the traction on the on the impression of course, becoming a few weeks okay.

Speaker 6: about the Q4, the ordering, the supplies, and we can see the traction on the impression, of course, in the coming few weeks are critical, and we will know more. This, of course, picks is very, very important to many of our customers and also to new customers that now are in the cell cycle and waiting to take the decision if to acquire additional.

I think Alex we will know more this of course, because it is very very important to many of our customers and also to add new customers up now in the sales cycle and waiting to take the decision is to acquire additional systems next year after the peak season.

But they're.

All in all in terms of impressions it looks a.

Very good the headwind that we still see in Q4 very visible is on a capital are acquisition.

Still very tough environment out there.

If I can getting longer customers looking for financing solution and payment terms and some of them are delaying their decision.

Speaker 8: looking for financing solution and payment terms and some of them delay the decision. Okay, thank you very much. Good luck. Thank you. Thank you. The next question we have comes from Tavir Arzm from Bockeys. Please go ahead. Hi, good afternoon. Thanks for taking my questions. Run and you mentioned potentially expanding to new applications. Can you give us an example of the type of new?

Speaker 9: Okay, thank you very much. Good luck.

Okay. Thank you very much.

Good luck. Thank you.

Speaker 4: Thank you. Thank you. The next question we have comes from Tavir Arzm from Bockeys. Please go ahead.

Thank you.

Yeah.

Next question, we have comes from Tavy Rosner from Barclays. Please go ahead.

Speaker 8: Hi, good afternoon. Thanks for taking my questions. Ronan, you mentioned potentially expanding to new applications. Can you give us an example of the type of new applications that you can see out there and that has scope to turn into meaningful revenues down the road?

Hi, good afternoon. Thanks for taking my questions. One in you mentioned potentially expanding to new applications.

Can you give us an example of the type of new applications that are that you can see out there and that is cooked to turn into meaningful revenues down the road.

Speaker 6: Thanks, Ravi. At this stage, I prefer not to disclose it because it's a big potential application for us. It's a technical area. I can say that it's in the sports market, but I cannot say more than that. What I can tell you that we are working with some of the biggest trends of the world.

Thanks Savi.

At this stage I prefer not to disclose it because it's it's it's a big potential application for us. It's a technical area I can say that it's in the sports market, but I cannot say more than that what I can tell you that we are working with some of the biggest brands of the world.

Speaker 6: with them and their direct fulfiller to change the way they are producing some of the technical stuff that they are doing, leveraging our technology and we are talking here on a big potential if we will be able to materialize.

With them and their direct fulfill that.

To change the way they are producing some of the technical stuff that theyre doing leveraging our technology and we are talking here on the big potential if we will be able to materialize at.

Speaker 6: They found technology, innovation, that we are already brought to the table and we are still continuing to developing it. It looks promising, this is why I'm mentioning it today, but this day I don't want to relate to a specific application and the specific numbers. Hopefully in the next call that would be able to provide a bit more.

There's some technology.

In innovation, but we already bought to the table and we're still continuing to developing it.

It looks promising this is why I'm mentioning it today, but at this stage I don't want to relate to specific application.

And is this specific numbers hopefully in the next calls I wouldn't be able to provide a bit more detail.

Speaker 8: Okay, thanks. And then on the operating leverage, like looking into 2024, do you expect to further reduce the absolute OPEX level or just growing revenues and as a

Okay. Thanks, and then on the operating leverage like looking into 2024 do you expect to further reduce the absolute opex level or just.

Growing revenues and as a result, and it will return to profitable growth.

Speaker 6: So at this stage, of course, as I mentioned, we are planning to have a modest growth of revenue.

So.

This stage of course, we as I mentioned, we are planning to have a modest growth of revenues, but we're taking we're taking steps on enhancing our operating efficiency and operating model moving forward.

Speaker 6: But we are taking steps on enhancing our operating efficiency and operating model moving forward.

Speaker 6: We understand that the dynamic out there is, from our perspective, still tough and we will continue to work on it.

We understand that the dynamic out there is from our perspective still tough and we will continue to adjust our operating efficiencies and operating model accordingly.

Speaker 6: operating efficiencies and operating model accordingly to be portable for the entire year of 2024. As a reminder, there is a seasonality and of course Q1 is the lowest quarter while H2 is the strongest quarter of the year, both in terms of growth, revenues and profitability.

Two to be profitable for the entirety.

Of 'twenty 'twenty four is.

A reminder, there's a seasonality and.

Of course Q1 is the lowest sports one H two is the strongest quarter of the year.

Both in terms of growth.

Venues handful stability.

Speaker 6: Now, do you want to add anything on that? No, thank you. Cover the extension. You can.

Hey, Lloyd do you want to add anything on that yeah. Okay. Okay.

Okay.

Great. Thank you guys and stay safe.

Thank you.

Speaker 4: I'd even gentlemen just your reminder, if you would like to ask a question, please press star and then one.

Thank you Eddie.

Gentlemen, just a reminder, if you would like to ask a question. Please press star and then one now.

Speaker 4: This question, me how come from Eric Woodward from Morgan's Downey? He's go ahead.

Next question, we have comes from Erik Woodring from Morgan Stanley. Please go ahead.

Speaker 10: Super good morning guys. Thank you for taking my questions and all the support to you guys from Team Morgan Stanley here. Two questions. Maybe wrote in first for you. Some of us saw firsthand how successful that it must show was for Cornie. Across the different kind of new systems and their upgrades that you sold, do you still expect to convert about 90% of those letters of intent? And second, can you help us understand kind of what percent or directionally how much of those deals you believe will convert in 2023 versus what is more so in the pipeline for 2024? And then I will follow up. Thank you.

Super Good morning, guys. Thank you for taking my question Turner and all the support to you guys from from Kim Morgan Stanley here.

Two questions maybe ronen first for you you know some of US saw firsthand how successful it must show was for coordinate.

Now across the different kind of new systems and upgrades that you sold.

Do you still expect to convert about 90% of those letters of intent and second you know.

Can you help us understand kind of what percent or directionally, how much of those deals you believe will convert you know in 2023 versus what is what is more so in the pipeline for 2024, and then I have a follow up thank you.

Speaker 6: Yeah, so I can tell you that we're working very, very closely on all those opportunities and let a lot of intent and PO that we received from Itsma. Itsma was indeed a very successful event.

Yeah. So I can tell you is that are we're working very very closely on all of those opportunities and in that letter of intent and a P. O that we received from Oh, It's fine. It's my was indeed, a very successful event.

Speaker 6: And I can tell you that all most of the opportunities that we had are still live and serious, we have already converted close to 20.

And I can tell you that the all most of our of the opportunity that we had are still alive and Sirius we have already converted close to 20 deals customers.

Speaker 6: deals, customers out of itchma and we expect to have a few more in Q4 with the rest coming into H1 in 2024. So we are working very closely. I can tell you that most of the deals

Each month, and we expect to have a few more in Q4 with the rest are coming into H. One our 2020 for so are we are working very closely I can tell you is that most of the deals still alive and kick.

Speaker 6: still alive and kicking. Yes, the sell cycle is taking longer than we expected at Ithma. Some deals that we closed at Ithma are still open to deliver the system because the financing is not closed yet, but the customer is serious. We hardly lost any deals out of those opportunities that we had at Ithma. Thank you.

King Yes, the sales cycle is taking longer than we expected.

It might have some deals that we closed the teeth.

Are still open to two eh.

To deliver the system because the financing is not closed yet but.

But the customer a serious serious we hardly lost and it is out of those are opportunities that we have that.

No. Thank you that is that is very helpful color and then maybe as my follow up you know obviously.

Speaker 10: And then maybe as my follow-up, you know, obviously it's a challenging world right now. I'm sure you're not necessarily happy with the level of underperformance in the Stocks Institute QEarnings. It's just the nature of the markets today, unfortunately. So maybe my question is, you know, I can sense from you a belief in the products, a belief in the pipeline, you know, your ability to manage costs more efficiently and you have something like 70% of your market cap in cash and no material debt. So why aren't you buying back more stock, you know, in the near term to send a message of confidence to the market? And that's it for me. Thanks so much.

Challenging world right now I'm sure you're not necessarily happy with the level of underperformance in the stock since two Q earnings. It's just the nature of the markets. Today. Unfortunately, so maybe my question is you know.

I can sense from you of belief in the products I believe from the pipeline you know your ability to manage costs more efficiently and you have something like 70% of your market cap in cash and no material debt. So why aren't you buying back more stock you know in the near term to send a message of confidence to the market and that's it.

For me thanks, so much.

Speaker 3: Hi, Eric. Well, let me just respond to you. If you remember what I said in my prepared remarks, the average execution price.

Hi.

Let me just respond to you if you remember what I said in my prepared remarks, the average execution price of our buyback has been about $22 per share and and at that price. We believe that the market had meaningfully undervalued us. So now with the stock price just a few dollars away from cash value as you mentioned.

Speaker 3: of our buyback has been about $22 per share. And at that price, we believe that the market had meaningfully undervalued us. So now with the stock price, just a few dollars away from cash value as you mentioned, we see an even more attractive opportunity to repurchase our shares. And as a result, we plan to be much more aggressive in using the remainder of our existing share repurchase program.

We see an even more attractive opportunity to repurchase our shares and as a result, we plan to be much more aggressive in using the remainder of our existing share repurchase program. Because we do believe that combined with our existing pipeline of investment opportunities. This is a very strong use of a portion of our cash balance.

Speaker 3: because we do believe that combined with our existing pipeline of investment opportunities, this is a very strong use of a portion of our cash balance.

Great. Thanks, so much for the color and good luck guys.

Thank you.

Speaker 11: Thank you. The next question is from Chris Moore with CJS Securities. Please proceed with your question.

Thank you. The next question is from Chris Moore with CJS Securities. Please proceed with your question.

Speaker 12: Terrific, thank you. Appreciate technical questions. Obviously, we talk a lot about the macroeconomic headwinds continue to create uncertain.

Terrific. Thank you I appreciate taking a couple of questions. Obviously, you know we talk a lot about the macroeconomic headwinds continue to create uncertainty.

Speaker 12: Are there certain products that will likely be less impacted in fiscal 24 than others, regardless of the macro backdrop?

Just are there certain products that will likely be less impacted in fiscal 'twenty four.

You know then others, regardless of the macro backdrop.

Okay.

Speaker 6: So when you relate to the product, I assume you relate to system because part of the product, of course, the ink and supplies and supplies are mentioned, continue to grow nicely in Q3. We expect it to grow in Q4 and I'm talking era of the region, sequentially, of course.

So when you relate to product excuse me relate to system, because a part of the products of course, Oh, they they inked and supplies and supply as I mentioned continues to grow nicely in Q3, and we expect it to grow in Q4, and I'm talking Eagle Ford region.

Speaker 6: And also in 2024, we expect supplies to continue to go. As we see, the consumption going with our install base, and also we are entering to new markets and new customers selling additional fiftens. In terms of fiftens,

In Chile of course, and also in 'twenty 'twenty four we expect supplies to continue to grow as.

As we see our the consumption growing with our installed base and also we are entering two new markets and new customers selling additional.

Systems in terms of our systems.

Speaker 6: Look, the entire dynamic is tough. What I mentioned before, the growth that we see more in the retails and brands.

Look the entire dynamic he stuff what I mentioned before.

The growth we see in the more in the retailers and brands are we see are those customers are getting in and understanding that they have to change their business model into on demand and to get rid of their inventory to react faster to the.

Speaker 6: We see those customers are getting and understanding that they have to change their business model into on demand and to get rid of their inventory, to react faster to the market. And they have no choice. This is the time for them to change. And many of them are jumping into it. And Cornish is the only one that can provide them the quality and the productivity and the TCO that they acquired.

Market and they have no choice. There. This is the time for them to change and many of them are jumping into it and coordinate he's the only one that can provide them the quality and the productivity in the tissue that required. So we expect to see the continued growth coming from these places and also from the screen replacement there.

Speaker 6: So we expect to see the continued growth coming from these places and also from the screen replacement. The DTS, as I mentioned, direct to

T S. A as I mentioned direct to fabric.

Speaker 6: Fabric is another growth engine within Cornit, and there we are seeing the growth coming more from places like Latin America, specifically Brazil and India.

Fabric is another growth engine and we think we'll need and there we are seeing the golf coming more from places like Latin America, specifically, Brazil.

And India.

Got it I appreciate that color and maybe just as my follow up Laurie had mentioned two new partners on the on the financing side, maybe can you just give a little bit more.

Speaker 12: Maybe just as my follow-up, Lori had mentioned two new partners on the financing side. Maybe can you just give a little bit more?

Speaker 12: detail or an update there. Was Q3, for example, meaningfully helped by the financing option?

Detailed or an update there was with Q3 for example, meaningfully helped by by the financing options.

Speaker 3: Sure. So, as I said earlier, we have onboarded two new financing partners. In the third quarter, more than 20% of our systems were financed by financing partners, excluding the two new ones that we just onboarded. So it is providing a good source of support for our business, and we certainly hope to expand that in the future. These two new partners, one is in Europe and one is in the US.

I'm sure so as I as I said earlier, we have on boarded two new financing partners.

In the third quarter more than 20% of our systems were financed by financing partners. Excluding the two new ones that we just on boarded so it is providing a good source of support for our business and we certainly hope to expand that in the future. These these two new partners. One is in Europe, and what is in the U S. So we're.

Speaker 3: So we're covering those areas as best as we can as well.

Covering those areas as best as we can as well.

Got it that's a helpful number thanks Laura.

Yeah.

Speaker 11: Thank you our next question is coming from Jim Raschewdie with Needham. Please proceed with your questions.

Thank you. Our next question is coming from Jim Ricchiuti with Needham. Please proceed with your question.

Speaker 13: Hi, good morning. This is Chris Granga, honor for Jim. Thank you for taking the questions.

Hi, Good morning. This is Chris screen Garner for Jim. Thank you for taking the questions.

Speaker 13: You had mentioned that there was a bit of a pause on the upgrades.

You had mentioned that there there was a bit of a pause on the upgrades in Q3 as as people get ready for peak season I'm just curious.

Speaker 13: as people get ready for P2. I'm just curious what the runway is for continued upgrade.

What the runway is for continued upgrades in Q4 and and beyond what if you could elaborate on that potential.

Speaker 13: and beyond what if you can elaborate on.

Potential thank you.

Speaker 6: Thanks Chris, let me clarify, Q3 was another good quarter for upgrades from Atlas to Atlas Max.

Thanks, Chris So let me clarify Q3 was another good quarter for upgrades form Atlas to watch us amongst so Q1 Q2 Q3 was excellent quarter in terms of upgrade and meeting our expectation and plans for this year, we didn't expect to continue.

Speaker 6: So Q1, Q2, Q3 was excellent water in terms of upgrades and meeting our expectation and plans for this year. We didn't expect to continue in Q4. Q4 are customers are focusing on fixes and they need the machines in full-power productivity and they cannot allow the machine to be upgraded, which take the machine a few days off.

In Q4, Q4 customers are focusing on pyxis and they need the machines and full productivity and they cannot allow the machine to be upgraded.

With respect to machine few days off so we don't expect in Q4 and this is the powers are on the upgrades. We do expect continue the upgrade cycles in Q1 2012 before we already have orders for customer for Q1.

Speaker 6: So we don't expect in Q4, and this is the pause on the upgrades, we do expect continue the upgrade cycles in Q1 2024. We already have orders for customers for Q1 2004. And as I mentioned, we still didn't receive the order from our global strategic customer for that. And this is a potentially upside.

2000, and for and as I mentioned, we still didn't receive the order from a global strategic customer for that and this is a potentially upside.

Got it thank you and maybe just as a follow up to the question asked earlier about the extended payment plans have you found that you know for customers on the margin that this is something that is.

Speaker 13: And maybe just as a follow up to the question asked earlier about the extended payment plan, have you found that for customers on the margin that this is something that is?

Speaker 13: making their purchase decision easier and how much uptake do you expect with these financing plans?

Making making our there to shape their purchase decision easier and how how much uptake do you expect with these these financing plans longer term. Thank you.

Speaker 3: I do believe that the opportunity to...

I do believe that the opportunity to.

Hum.

Speaker 3: extended payment terms on our products is helpful. In some cases, it does make all the difference for the timing of a customer when they're willing to step up to the plate as to how much is going to depend on the future. And.

Kind of extended payment terms on on our products is helpful. In some cases it does make all the difference for the timing of other customer when they are willing to step up to the plate as to how much is going to depend on the future.

And it's it's unclear to me right now exactly how much that could be but I do believe that it will represent a significant portion at least over the next 12 months yourself.

Speaker 3: unclear to me right now exactly how much that could be, but I do believe that it will represent a significant portion at least over the next 12 months or so.

Great. Thank you very much.

Speaker 11: Thank you, our next question is coming from Greg Palm with Greg Halum Capital Group. Please proceed with your questions.

Thank you. Our next question is coming from Greg Palm with Craig Hallum Capital Group. Please proceed with your question.

Speaker 5: Yeah, thanks. Just a couple of quick follow-ups on the capital allocation front following up on a previous question. Is there anything that would preclude you from doing an accelerated chair repurchase? Would that require that the same kind of a court approval as a normal buyback?

Yeah. Thanks, just a couple of quick follow ups on the capital allocation front I'm following up on a previous question is there anything that would preclude you from doing an accelerated share repurchase would that require that the same kind of a court approval as normal buyback.

Speaker 3: We have the court approval for the buyback that we announced.

We have the court approval for the buyback that we announced.

Speaker 3: that court approval will take us all the way through into Q1. So we have that approval. And we can always ask for another.

That court approval will take us all the way through into Q1, so we.

We have that approval and I guess I'll ask for another.

Speaker 5: Yeah, I guess I'm asking if you were to use that up, it sounds like you're going to be more aggressive. If you use that up and want to do something like an accelerated share or purchase, are you able to do that? Would that require the same kind of court approvals and normal buyback?

Yeah, I I guess I'm asking if you were to use that up it sounds like you're going to be more aggressive if you use that up and wanted to do something like an accelerated share repurchase are you able to do that would that require the same kind of court approvals the normal buyback.

Yeah.

Speaker 3: Yes, well, yes, you require the courts approval to do a buyback whether you call it accelerated or not.

Yeah, Yeah, well yesterday, you require the court's approval to do a buyback whether you call it accelerated or not.

Speaker 5: Yep, okay, understood. And I guess you gave some commentary on revenue and op-ex. What about gross margin for next year?

Okay understood.

And I guess, just you gave some commentary on revenue and Opex what about gross margin you know for for next year.

Speaker 5: You know, I presume that MIX will be positive if we still assume consumables are a greater portion of MIX than in years past. But any other way to sort of qualify how you're thinking about growth margin and the continued improvement there in fiscal 24.

You know I I presume that mix will be positive if we still assume consumables are you now a greater portion of mix and then in yours pass, but any other way to sort of qualify how you were thinking about gross margin and the continued improvement there in fiscal 'twenty four.

Speaker 3: Well, let's let's start at the beginning. So as you mentioned, there's the issue of the mix between products and services and consumables that certainly has

Well, let's let's start at the beginning so as you mentioned, there's the issue of the mix between products and services and consumables that certainly has had an impact the second impact is that we have been throughout this year, taking our cost saving measures in cost of sales, which we hoped.

Speaker 3: has an impact. The second impact is that we have been throughout this year taking cost saving measures in cost of sales, which we hope to also see the benefit. It takes a bit more time to see it, but we do expect to see some benefit. We also have other initiatives aimed at improving efficiencies in matters that affect gross margin. But again, the...

Also see the benefit it takes a bit more time to see it but we.

We do expect to see some benefit we also have other initiatives aimed at improving efficiencies.

In matters that affect gross margin, but again the.

Speaker 3: Major benefit that you see from these types of programs usually takes a little bit more time than you can affect in operating expenses and also improving growth margin is of course, in our case, somewhat dependent upon volume. So as volumes improve, we would also see better growth margin.

The major benefit that you see from these types of programs usually it takes a little bit more time than that and you can affect and in operating expenses.

And also improvement in gross margin is of course in our case are somewhat dependent upon volume. So as volumes improve we would also see a better gross margins.

Speaker 6: Okay. I would just add, you should expect in Q4, of course, improvement in the gross margin due to the mix of ink supplies versus systems. And for the overall 2024, we do expect a modest improvement on gross margin as well. Some of it on the efficiency that Lori was mentioning, some of it is related to volume.

Okay understood.

I will just add.

You should expect in Q4 of course improvement in the gross margin just due to the mix of our ink supplies versus our system and for the overall 2024, we do expect a modest improvement in gross margin as well.

Some of it on.

On the efficiencies of Florida was mentioning some of it is related to volume.

Speaker 5: Yep, okay. Alright, thanks again for taking the questions.

Yep, Okay alright.

Thanks again for taking the questions.

Yeah.

Okay.

Speaker 11: Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back over to Jared Maiman for an additional closing remarks.

Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back over to Jared mainland for any additional closing remarks.

Speaker 1: Hey, thank you. Thank you all. Ah, go ahead. Ciao. Thank you. I'm pretty good. Thank you. I'm going to get some. Should you have any follow-ups? Please don't hesitate to reach out to me or Sarkis.

Well thank you all.

Go ahead Sir.

Okay.

Paul did you have any follow ups, please don't hesitate to reach out to mere sarkies.

Thank you very much.

Speaker 11: Thank you. Ladies and gentlemen, this is us conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

Okay.

Okay.

Hum.

Yeah.