Q2 2024 Kornit Digital Ltd Earnings Call

Yeah.

[music].

Yes.

Operator: Good morning, ladies and gentlemen, and welcome to the Kornit Digital second quarter 2024 earnings conference call. At this time, all lines are in listen-only mode.

Operator: Good morning, ladies and gentlemen, and welcome to the Kornit Digital 2nd quarter 2024 earnings conference call. At this time, all lines are in listen-only mode.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the coordinate pitched up second quarter 'twenty 'twenty four earnings conference call.

Speaker Change: At this time all lines are in listen only mode.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, August 7, 2024. I would now like to turn the conference over to Mr. Jared Maymon, Global Head of Investor Relations.

Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call, you require immediate assistance. Please press star zero for the operator.

Speaker Change: In the presentation, we will conduct a question and answer session.

Speaker Change: That's any time during this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Wednesday August seven 2024, I would now like to I would.

Operator: This call is being recorded on Wednesday, August 7, 2024.

Operator: I would now like to turn the conference over.

Jared mainland: I'd now like to turn the conference over to Mr. Jared mainland global head of Investor Relations.

Jared Maymon: Christopher Smith, Jared Maymon, Global Head of Investor Relations. Please go ahead.

Speaker Change: Please go ahead.

Jared Maymon: Thank you, operator.

Speaker Change: Thank you operator.

Jared Maymon: Good day, everyone, and welcome to Kornit Digital's 2nd quarter 2024 earnings conference call. Joining me today are Chief Executive Officer Ronen Samuel and Lauri Hanover, Kornit's Chief Financial Officer. For today's call, Reddit will provide comments on the 2nd quarter of 2024. Lauri will then review the 2nd quarter numbers and provide our 3rd quarter outlook before we open it up for Q&A.

David: Hey, David.

Jared Maymon: Hello, everyone, and welcome to Kornit Digital's second quarter of 2024 earnings conference call. Joining me today are Chief Executive Officer Ronen Samuel and Lauri Hanover, Kornit's Chief Financial Officer.

Speaker Change: And welcome to <unk> Digital's second quarter of 2024 earnings Conference call.

Speaker Change: Joining me today are Chief Executive Officer Ronen Samuel.

Hangover Corning: Hangover Corning's Chief Financial Officer.

Speaker Change: For today's call Ronan will provide comments on the second quarter of 2024.

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

Jared Maymon: Before we begin, I would like to remind you that forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other U.S. Securities laws will be made on this call. These forward-looking statements include but are not limited to statements relating to the company's plans, strategies, projected results of operations, or financial condition, and all statements that address developments that the company expects will occur in the future. 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. 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 28, 2024, which identifies specific risk factors that could cause actual results to differ materially.

Jared Maymon: For today's call, Ronen will provide comments on the second quarter of 2024. Lauri will then review the second quarter numbers and provide our third 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 1995 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 plans, strategies, projected results of operations, or financial condition, and all statements that address developments that the company expects will occur in the future.

Speaker Change: Before we begin I would like to remind you that forward looking statements within the meaning of the private Securities Litigation Reform Act of 1090, Fives and other U S Securities laws will be made on this call.

Speaker Change: These forward looking statements include but are not limited to statements relating to the Companys plans strategies projected results of operations or financial condition and all statements that address developments that the company expects will occur in the future.

Jared Maymon: 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. 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 28, 2024, which identifies specific risk factors that could cause actual results to differ materially. Any forward-looking statements are made as of this date, and the company undertakes no obligation to publicly update any forward-looking statements, except as required by law.

Speaker Change: 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.

Jared Maymon: 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.

Jared Maymon: 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 in the company's earnings release published today, which is also posted on the company's investor relations website.

Jared Maymon: Additionally, the company will be making reference to certain non-GAAP financial measures on this call. The reconciliation of these non-GAAP measures and the most directly comparable GAAP measures can be found on the company's earnings release published today, which is also posted on the company's Investor Relations website.

Ronen Samuel: At this time, I would now like to turn the call over to Ronan.

Ronen Samuel: At this time, I would now like to turn the call over to Ronen. Okay, Ronen?

Ronen Samuel: Thanks, Jared.

Ronen Samuel: Thanks, Jared. Good morning, everyone, and welcome to our second quarter 2024 Earnings Conference. Today, we reported revenue of $48.6 million and an adjusted EBITDA margin of negative 3%, which is within the guidance range we provided in May. I am pleased to announce that we generated positive cash flow from operations in the second quarter, marking our third consecutive quarter of positive cash flow. The year-over-year boost to our EBITDA and cash flow reflects improved efficiencies from the cost-saving measures we implemented over the last several quarters.

Ronen Samuel: Good morning, everyone, and welcome to our second quarter 2020-24 earning conference call. Today, we reported revenue of 48.6 million and an adjusted EBDA margin of negative 3%, which is within the guidance range we provided in May. I am pleased to announce that we generated positive cash from operations in the second quarter, marking our third consecutive quarter of positive cash flow. The year-over-year boost to our EBDA and cash flow reflects improved efficiencies from the cost-saving measures we implemented over the last several quarters. During the second quarter, we again saw growth in impressions and consumables, supporting our view that our customers continue to utilize available capacity.

Ronen Samuel: During the second quarter, we again saw growth in impressions and consumables, supporting our view that our customers continue to utilize available capacity. This growth is driving our ability to improve our results and stabilize our business in the second half of this year. Despite the macroeconomic environment remaining unstable and delaying investments in capital equipment, we are witnessing a pivotal shift to on-demand production in the fashion industry. Speed, on-time delivery, and an increase in the variety of SKUs are becoming crucial. At Kornit, we are not just adapting; we are leading.

Impressions and consumable supporting our view that our customers continue to utilize the available capacity. This growth is driving our ability to improve our results and stabilize our business in the second half of this year.

Ronen Samuel: This growth is driving our ability to improve our results and stabilize our business in the second half of this year. Despite the macroeconomic environment, remaining unstable and delaying investments in capital equipment, we are witnessing a pivotal shift to on-demand production in the fashion industry. Speed, on-time delivery, and an increase in the variety of aspects of the industry. The risk we use are becoming crucial. At Kornit, we are not just adapting. We are leading. Our innovative solutions are designed to help our customers succeed in these dynamic times. Two of these groundbreaking solutions are the AIC model and are recently released a Polo system.

Speaker Change: Despite the macroeconomic environment remaining unstable and delaying investments in capital equipment, we are witnessing a pivotal shift to on demand production in the fashion industry.

Speaker Change: Speed on time delivery and an increase in the variety of Skus.

Speaker Change: Becoming crucial.

<unk>: At <unk>, we are not just adapting we are leading our innovative solutions are designed to help our customers succeed in this dynamic times.

Ronen Samuel: Our innovative solutions are designed to help our customers succeed in this dynamic time. Two of these groundbreaking solutions are the AIC model and the recently released Apollo system. The Apollo continues to be well-received in the market, driving significant improvements in productivity and total cost of ownership. It is regarded as the best solution for replacing screen printing in mid-size runs.

<unk>: Two of these groundbreaking solutions or the ASC model and our recently released a portal system.

Ronen Samuel: The Apollo continues to be well-received in the market, driving significant improvements in productivity and total cost of ownership. It is regarded as the best solution for replacing screen printing in mid-sized runs. In Q2, we received several additional orders for Apollo's, with four specifically orders through our AIC model. The pipeline for 2024 is robust with both AIC and CAPEX deals, and we are actively working on our pipeline for 2025 with new and existing customers. We believe the AIC model is a game changer for our customers and for us. This program removes barriers to entry by eliminating large initial capital investment and providing customers with predictability.

<unk>: The Apollo continues to be well received in the market.

<unk>: Driving significant improvements in productivity and total cost of ownership is regarded as the best solution for replacing screen printing in mid size runs in Q2, we received several additional orders for our polo's with full specifically order through.

Ronen Samuel: In Q2, we received several additional orders for Apollos, with four specifically ordered through our AIC model. The pipeline for 2024 is robust with both AIC and CAPEX deals, and we are actively working on our pipeline for 2025 with new and existing customers. We believe the AIC model is a game changer for our customers and for us. This program removes barriers to entry by eliminating a large initial capital investment and providing customers with predictable unit economics, as they know exactly how much each impression will cost.

<unk>: Our AIC model the pipeline for 2024 was robust with both AAC and Capex deals and we are actively working on our pipeline for 2025 with new and existing customers.

<unk>: We believe the ASC model is a game changer for our customers and for us.

<unk>: This program removes barriers to entry by eliminating large initial capital investment and providing customers with predictable unit economics as they know exactly how much each impression will course.

Ronen Samuel: It is a profitable unit economics. As they know exactly how much each impression will cost. Simultaneously, this model offers Kornit a clearer view of revenues, profitability, and cash flow, which is especially valuable given the market volatility we have experienced over the past several years. Given the strong initial feedback and the traction we have seen with our AIC model, we decided this quota to begin piloting the model on the Atlas Mac system. Like the Apollo AIC model, the Atlas Mac's AIC model is receiving strong and positive feedback from both existing and new customers, and our pipeline of potential orders is gaining momentum.

Ronen Samuel: Simultaneously, this model offers Kornit a clearer view of revenues, profitability, and cash flow, which is especially valuable given the marked volatility we have experienced over the past several years. Given the strong initial feedback and the traction we have seen with our AIC model, we decided this quarter to begin piloting the model on the Atlas Max system. Like the Apollo AIC model, the Atlas Max AIC model is receiving strong and positive feedback from both existing and new customers, and our pipeline of potential orders is gaining momentum.

<unk>: Simultaneously this model offer coordinate a clearer view of revenues profitability and cash flow, which is especially valuable given the market volatility we have experienced over the past several years.

<unk>: Given the strong initial feedback and the traction we have seen with our <unk> model, we decided this quarter to begin piloting the model on the Atlas Max system.

<unk>: Like the polo AAC model, the Atlas Smacks AAC model is receiving strong and positive feedback from both existing and new customers in our pipeline of potential orders is gaining momentum.

Ronen Samuel: Moving to direct to fabric, this quota will continue to see traction in key textile production regions, particularly in Asia-Pacific. Key regions such as India, China, Peru, and Portugal are viewed as significant growth drivers for our future in direct to fabric. Additionally, we are making progress in developing applications for the food trade industry, and we are working diligently to have a solution ready for production in the coming quarters. Given these trends, we continue to anticipate a stronger second half compared to the first. We self-expected to increase by 20 to 25 percent, driven primarily by sequential growth in consumables.

Ronen Samuel: Moving to Direct-to-Fabric. This quarter, we continue to see traction in key textile production regions, particularly in Asia Pacific. Key regions, such as India, China, Peru, and Portugal, are viewed as significant growth drivers for our future in direct-to-fabric. Additionally, we are making progress in developing applications for the footwear industry, and we are working diligently to have a solution ready for production in the coming quarter. Given these trends, we continue to anticipate a stronger second half compared to the first, with sales expected to increase by 20-25%, driven primarily by sequential growth in consumables.

<unk>: Moving to direct to fabric. This quarter, we continued to see traction in key textile production regions, particularly in Asia Pacific <unk>.

<unk>: Key regions, such as India, China, Peru, and Portugal, our view as significant growth drivers for our future in direct to fabric. Additionally.

<unk>: Additionally, we are making progress in developing applications for the footwear industry and we are working diligently to have a solution ready for production in the coming quarters.

Given these trends we continue to anticipate a stronger second half compared to the first with sales expected to increase by 20% to 25% driven primarily by sequential growth in consumables. We also expect positive adjusted EBITDA on a full.

Ronen Samuel: We also expect positive adjusted EBIDA on a full-year basis and a positive operating cash flow for the entirety of 2025.

Ronen Samuel: I'm excited to announce that we will hold an investor event on September 10th in Las Vegas in conjunction with our participation at the Printing United Retro. At this event, we plan to expand on many of the topics we have discussed in the recent quarters, including our direction for the all-inclusive program, our product roadmap, long-term go-to-market strategy, and our outlook on the market over the next few years. This event will feature key customers and demand generators who will share their experiences in the own demand fashion market. It will be our first sizable investor event since our Investor Day in 2021.

Ronen Samuel: We also expect positive adjusted EBITDA on a full-year basis and a positive operating cash flow for the entire of 2024. I'm excited to announce that we will hold an investor event on September 10th in Las Vegas in conjunction with our participation in the Printing United Threats conference. At this event, we plan to expand on many of the topics we have discussed in recent quarters, including our direction for the all-inclusive program, our product roadmap, long-term go-to market strategy, capital allocation strategy, and our outlook on the market over the next few years.

Ronen Samuel: This event will feature key customers and demand generators who will share their experiences in the on-demand fashion market. It will be our first sizable investor event since our Investor Day in 2021. For those who are able to attend in person, we will also offer a tour of the show floor and a demo of the new Apollo system. Please keep an eye out for an official invitation and registration link.

Ronen Samuel: For those who are able to attend in person, we will also offer a tour of the show floor and a demo of the new Apollo system. Please keep an eye out for an official invitation and registration link. We hope to see you there.

Ronen Samuel: We hope to see you there. In conclusion, during the second quarter, we achieved a significant year-over-year improvement in profitability and cash flow generation. Despite the challenging macroeconomic environment, we continue to see improvement in impressions, consumables, and utilization. These enhancements, combined with a backlog of Apollo orders and a growing interest in an all-inclusive click model, are enabling us to stabilize the business and improve our P&L in the second half of 2024 and beyond. Now, I will turn the call over to Lauri for a closer look at our Q2 results and guidance for the third quarter.

Ronen Samuel: In conclusion, during the second quarter, we achieved significant irreversible improvements in profitability and cashflow generation. Despite the challenging macroeconomic environment, we continue to see improvement in impressions, consumable, and utilization. This enhancement, combined with a backlog of Apollo orders and the growing interest in all-inclusive click model, are enabling us to stabilize the business and improve our PNL in the second half of 2024 and beyond.

<unk>: In the second half of 2024 and beyond now let me turn the call over to Laurie for a closer look at our Q2 results and guidance for the third quarter.

Lauri Hanover: Now, let me turn the call over to Laurie for a closer look at our future results and guidance for the third quarter. Thank you, Ronan, and good day to everyone. Second quarter revenues were 48.6 million, within the guidance range of 47 million to 52 million we provided in May. This quarter, consumables contributed to year-over-year growth, while systems and services sales declined, as expected.

<unk>: <unk>.

Lauri Hanover: Thank you, Ronen, and good morning to everyone. Second quarter revenues were $48.6 million, within the guidance range of $47 million to $52 million we provided in May. This quarter, consumables contributed to year-over-year growth, while systems and services sales declined as expected. Moving to margins.

Laurie: Thank you Ronen and good day to everyone second quarter revenues were $48 6 million within the guidance range of 47 million to $52 million, we provided in may.

Laurie: This quarter consumables contributed to year over year growth, what systems and services sales declined as expected more.

Lauri Hanover: Moving to margins. Second quarter non-GAAP growth margin was 48.6% compared with 36.1% in the same period last year. The year-over-year improvement is once again primarily attributable to a better mix between comparatively higher margin consumables and systems, as well as reduced fixed costs due to our restructuring efforts. It is important to note that the second quarter margin also benefited from the conclusion of the first tranche of our warrant agreement, which covered purchases of $250 million in existing products and services by our largest global strategic account. As such, this quarter did not include an impact from expenses related to those warrants.

Moving to margins.

Lauri Hanover: Second quarter non-GAAP gross margin was 48.6%, compared with 36.1% in the same period last year. The year-over-year improvement is once again primarily attributable to a better mix between comparatively higher-margin consumables and systems, as well as reduced fixed costs due to our restructuring efforts. It is important to note that the second quarter margin also benefited from the conclusion of the first tranche of our warrant agreement, which covered purchases of $250 million in existing products and services by our largest global strategic account.

Laurie: Quarter non-GAAP gross margin was 48, 6% compared with 36, 1% in the same period last year.

Laurie: The year over year improvement is once again, primarily attributable to a better mix between comparatively higher margin consumables and systems as well as reduced fixed costs due to our restructuring efforts. It is important to note that the second quarter margin also benefited from the conclusion of the first tranche of.

Laurie: Our warrant agreement, which covered purchases of $250 million in existing products and services by our largest global strategic account as such this quarter did not include an impact from expenses related to those warrants.

Lauri Hanover: As such, this quarter did not include an impact from expenses related to those warrants. Per this existing agreement, any purchases of products and services categorized as new business up to $150 million would be eligible for warrants.

Lauri Hanover: Per this existing agreement, any purchases of products and services categorized as new business up to $150 million would be eligible for warrants.

Lauri Hanover: Looking at operating expenses, total second quarter non-GAAP operating expenses were 28 million, a decrease of 6.1 million, or 17.9 percent, from 34.1 million in the same period last year. The reduction in expenses reflects our cost savings and restructuring initiatives, including a meaningful workforce reduction, consolidation of facilities, and a phasing out of our legacy platforms. Also, remember that the second quarter last year included significant marketing expenses associated with our participation at the Ithma Trade Show, which did not repeat this quarter. Lastly, this quarter's operating expense includes an allowance for doubtful debts of approximately 1.5 million related to a North American customer that filed voluntary petitions under Chapter 11 of the U.S.

Lauri Hanover: Looking at operating expenses, total second-quarter non-GAAP operating expenses were $28 million, a decrease of $6.1 million, or 17.9%, from $34.1 million in the same period last year. The reduction in expenses reflects cost savings and restructuring initiatives, including a meaningful workforce reduction, consolidation of facilities, and a phasing out of our legacy platforms. Also, remember that the second quarter last year included significant marketing expenses associated with our participation at the ITMA trade show, which did not happen this quarter.

Lauri Hanover: Lastly, this quarter's operating expense includes an allowance for doubtful debts of approximately $1.5 million related to a North American customer that filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code. Despite this event, we continue to target full year 2024 non-GAAP operating expenses to be approximately $20 million lower versus full year 2023. Moving to profitability, the second quarter adjusted EBITDA loss was $1.6 million, which is significantly better than the adjusted EBITDA loss of $10.7 million in the same period last year.

Lauri Hanover: Bank of C. Code. Despite this event, we continue to target full-year 2024 non-GAAP operating expenses to be approximately 20 million dollars lower versus the full-year 2023.

Lauri Hanover: Moving to profitability. Second quarter adjusted EBITDA loss was 1.6 million, which is significantly better than the adjusted EBITDA loss of 10.7 million in the same period last year. Adjusted EBITDA margin for the second quarter of 2024 was negative 3.4 percent, near the high end of the guidance range of negative 10 percent to 0 percent we provided in May. Again, continuing to reflect a meaningful improvement year over year.

Lauri Hanover: Adjusted EBITDA margin for the second quarter of 2024 was negative 3.4%, near the high end of the guidance range of negative 10% to 0% we provided in May, again continuing to reflect meaningful improvement year over year. Our balance sheet remains robust, with our quarter-end cash balance, including bank deposits and marketable securities, increasing to approximately $554 million. During the second quarter, we generated positive cash flow from operations of $4.5 million. This achievement once again reflects the benefits of our cost savings and restructuring initiatives coupled with a strong focus on collections.

Lauri Hanover: Our balance sheet remains robust, with our quarter-end cash balance, including bank deposits and marketable securities, increasing to approximately 554 million. During the second quarter, we generated positive cash flow from operations of 4.5 million. This achievement once again reflects the benefits of our cost savings and restructuring initiatives, coupled with a strong focus on collections. We remain focused on generating positive operating cash flow for the full year 2024.

Lauri Hanover: We remain focused on generating positive operating cash flow for the full year 2024. As Ronen highlighted, interest in our pilot of the all-inclusive click AIC offering remains strong. In the second quarter, we signed four new Apollo AIC units for delivery towards the end of this year. Based on the favorable response and encouraging feedback we received from target customers of the program, we made the decision to begin piloting the AIC program for the Atlas family of systems this quarter.

Laurie: We remain focused on generating positive operating cash flow for the full year 2024.

Lauri Hanover: As Ronan highlighted, interest in our pilot of the all-inclusive click AIC offering remains strong. In the second quarter, we signed four new Apollo AIC units for delivery towards the end of this year. Based on the favorable response and encouraging feedback we received from target customers of the program, we made the decision to begin piloting the AIC program for the Atlas family of systems this quarter. Overall, this year we expect to deliver 15 Apollo systems, and we are currently expecting 10 of those to be on the AIC model.

Ronen Samuel: As ronen highlighted interest in our pilot of the all inclusive click AIC offering remains strong in the second quarter, we signed four new Apollo AIC units for delivery towards the end of this year.

Speaker Change: Based on the favorable response and encouraging feedback we received from target customers of the program. We made the decision to begin piloting the AIC program for the Atlas family of systems This quarter.

Lauri Hanover: Overall, this year, we expect to deliver 15 Apollo systems, and we are currently expecting 10 of those to be on the AIC model. For the Atlas family of systems on AIC, we plan to provide an update on our progress at our investor event in September. I'd like to again emphasize that in the AIC model, revenue is generated from the impressions a customer produces over time rather than upfront at the time of a system sale.

Speaker Change: Overall this year, we expect to deliver 15 Apollo systems and we are currently expecting 10 of those to be on the AIC model for.

Lauri Hanover: For the Atlas family of systems on AIC, we plan to provide an update on our progress at our investor event in September. I'd like to again emphasize that in the AIC model, revenue was generated from the impressions a customer produces over time rather than upfront at the time of a system sale. As such, the P&L benefits of these systems shipped on AIC model will begin to ramp towards the end of this year and into 2025. As a reminder, we expect each of these Apollo AIC agreements to generate approximately 1 million of revenue annually.

Speaker Change: For the Atlas family of systems on AIC, we plan to provide an update on our progress at our Investor event in September.

Speaker Change: I'd like to again emphasize that in the AIC model revenue was generated from the impressions of customer produces overtime rather than upfront at the time of a system sale as such the P&L benefits of these systems shipped on AIC model will begin to ramp towards the end of this year.

Lauri Hanover: As such, the P&L benefits of these systems shipped on the AIC model will begin to ramp towards the end of this year and into 2025. As a reminder, we expect each of these Apollo AIC agreements to generate approximately one million dollars of revenue annually. Turning to third quarter guidance.

Speaker Change: And into 2025 as a reminder, we expect each of these Apollo AIC agreements to generate approximately 1 million of revenue annually.

Lauri Hanover: Moving to our share repurchase program, we were subject to a blackout period under our existing 10b18 trading plan and were unable to repurchase shares for most of the second quarter. As a result, our repurchase activity was limited to approximately 83,000 shares at an average price paid per share, net of fees, of $14.32. The existing authorization for our share purchase program expired in July. The Israeli approval process regarding share repurchases recently changed as well. We are currently navigating this new process.

Lauri Hanover: As Ronen mentioned, we look forward to updating the investor community on our capital allocation strategy at our upcoming investor event planned for September 10th.

Lauri Hanover: Turning to third quarter guidance, we currently expect revenues for the third quarter of 2024 to be between $48 million and $52 million, and adjusted EBITDA margin to be in the 1% to 6% range. That concludes our prepared remarks.

Ronen Samuel: With that, I will now turn it back over to Ronen to open up the call for Q&A. Ronen?

Ronen Samuel: Thank you, Laurie.

Operator: Thank you, Lauri. Operator, now we are ready to take questions from the audience.

Operator: Operator, now we're ready to take questions from the audience. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch stand phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question.

Greg Palm: Our first question comes from the line of Mr. Greg Palm from Craig Harlem Capital Group. Please go ahead.

Operator: Our first question comes from the line of Mr. Greg Palm, from Craig Hallam, Capitalco. Please go ahead.

Greg Palm: Greg, thank you.

Greg Palm: Hey everyone. Thanks for taking the questions here. Maybe starting with AIC model, if you could maybe just give us a little bit more of an update on progress you're seeing with Apollo, but more importantly, what gives you confidence that moving this to Atlas is the right decision? And does this mean you're now maybe broadening out this program with certain potential customers, type of customer that you maybe weren't expecting to do this initially with?

Ronen Samuel: Thank you, Greg.

Ronen Samuel: The AIC model is a game changer for this industry. To remind everyone, we were targeting with this program to penetrate new markets and bring incremental volume into cornice, and the initial feedback that we are receiving from customers is very encouraging. As of today, we, as Laurie mentioned, have assigned on multiple Apollo. We are planning to deliver about 15 systems this year. Out of these 15 systems, 10 Apollo will be on the all-inclusive click. What we hear from our customer is that they seem massive benefit for this program. First of all, it removes the barrier for entry.

Speaker Change: As of today, we as Louis mentioned.

Louis: As a sign on multiple apollo's.

Speaker Change: We are planning to deliver about 15 system. This year out of this 15 system tens of portals are will be on the all inclusive click.

Speaker Change: What we hear from our customers is that they see massive benefit for this program first of all it removes the barrier for entry and they don't need to invest a large amount for capital investment in the beginning.

Ronen Samuel: They don't need to invest the large amount for capital investment in the beginning; they can allocate this investment to other stuff, aligning their expenses with revenues and provide a predictable unit economy. Also, there is a massive benefit for Kornit. It clears the view for revenues of stability and cash flow. We expect that each unit that will be on AIC actually will produce more, more impression and more ink and more revenue. We assume that it will produce about 30% more in terms of impression versus the CAPEX program. Think about it. The tens of pollos that we are going to install this year, each one of them is going to generate on an annual basis a $1 million of revenues.

Speaker Change: They can allocate this investment to other stuff.

Speaker Change: Aligning their expenses with revenues.

Speaker Change: And provide them predictable unit economics.

Speaker Change: Also these are massive benefits for core knit it clears the view for revenues profitability and cash flow.

Speaker Change: We expect that each unit that will be on AAC actually will produce more impression and more ink and more revenue we assume that it will produce about 30% more in terms of impression versus the Capex program.

Ronen Samuel: This is need to be taken into account into the P&L starting in Q4, and it will be very meaningful for next year. The feedback that we are receiving is very positive, and therefore we have decided to open it also for the Atlas masses. The reason why we have decided to open it for the Atlas masses is because we are meeting many customers that cannot commit to a minimum volume that is addressed with the Apollo. Apollo is going after a massive volume. The minimum commitment in some customers is too high. Those customers that don't have high enough minimum commitment, the Atlas mass is the right solution.

Greg Palm: Right now we have a portfolio of solutions to address different volume and different types of customers, and again to remind everyone we are approaching incremental volume and many going after the screen replacement market, which will accelerate the growth of impression and consumable and revenue for Kornit moving forward. Got it.

Operator: Got it, that's helpful, appreciate all that. And then just on the warrant situation, just to be clear, you did generate revenue from your global strategic in the quarter, if you could confirm that. But going forward, are you saying you'll only receive or you'll only have a warrant impact if the purchases are on the new systems, is that right? Do I understand that right?

Greg Palm: That's all, Paul. Appreciate all that.

Greg Palm: And then just on the warrant situation, just to be clear, you did generate revenue from your global strategic in the quarter if you could confirm that. But going forward, are you saying you will only receive, or you only have a warrant impact if the purchases are on the new systems? Is that right? Did I understand that right? Yes. So, first of all regarding our global strategic customers, they are going very, very nicely. We see the growth in impression. We see the growth in, of course, supplies, consumption of supplies to remind everyone they increased their fleet in 2023.

Ronen Samuel: And now we see the results of this growing fleet and impression. And as I mentioned in the previous school, they also were looking for the max upgrade, and hopefully we'll get it sooner than later. In terms of the war, the war is agreement with our strategic customer global strategic customer completed the first branch and the first branch was about existing product and it was up to 250 million dollars. And the second branch is about new products, and it's up to 160 million dollars. So if they are global strategic accounts, will go and buy new products, i.e.

Ronen Samuel: Apollo's operators, then they will be able to utilize the second trends, but they continue to go with the current products as well. Okay, but to be clear, sounds like the relationship is still really solid and obviously growing based on what you said for Q2. Absolutely, absolutely. Yeah, okay.

Greg Palm: I'll leave it there. Thanks.

James Ricchiuti: Thank you, Mr. Greg. No, your next question goes from the line of Mr. James from Needham.

Operator: Thank you, Mr. Gregna. Your next question comes from the line of Mr. James from Needham. Please go ahead.

Chris Grenga: Please go ahead. Hi. This is Chris Grenga on for Jim. You spoke about the direct-to-fabric. I'm just curious if you could elaborate a bit more about what you're seeing there and whether you expect, when, you know, upon systems recovering, to see any difference in the pace or cadence of recovery between direct-to-garment, direct-to-fabric, visioning any difference there. Yeah, totally.

Christopher Grenga: Hi, this is Chris Grenga on behalf of Jim. You spoke about Direct-to-Fabric. I'm just curious if you could elaborate a bit more about what you're seeing there and whether you expect, upon systems recovering, to see any difference in the pace or cadence of recovery between Direct-to-Garment and Direct-to-Fabric, if there's any difference there.

Speaker Change: Yes.

Speaker Change: Any difference in the pace or cadence of recovery between direct to garment direct to fabric if theres any any difference there.

Speaker Change: Yes totally.

Ronen Samuel: There is a massive difference between the direct-to-garment to direct-to-fabric, totally different markets and different types of customers. Overall, what we see in the market is that the overall fashion market is moving to on demand. And fashion is choosing on demand. And this would be also the theme of the event, the investor event that we are going to have. What we hear from brands, retailers, demand generators, is that all-time delivery and speed to market is crucial. Variety of SKUs today is crucial. The lifespan of every product is getting shorter and shorter, and consumer would like to have more SKUs.

Speaker Change: Lots of different between the direct to government to direct to fabric hub totally different markets and different type of customers overall, what we see in the market is that the overall fashion market is moving to on demand.

Speaker Change: And fashion is choosing on demand and this will be also the theme of the event or the.

Speaker Change: The investor event that we're going to have a what.

Speaker Change: What we hear form brands retailers' demand generators.

Speaker Change: Is that all time delivery and speed to market is crucial variety of skus today is crucial.

Speaker Change: The lifespan of every product.

Speaker Change: Is getting shorter and shorter and consumer would like to have more skus.

Ronen Samuel: So all of it is driving shorter rounds. And we also can see production moving from offshore to near shore and to onshore. This, of course, reflects both in our DTG direct-to-garment business and also in the direct-to-fabric business. So direct-to-fabric, the excitement that we see is actually going after new value applications, which are unique, and we can bring huge value to the industry. One of them that we mentioned is footwear. This footwear industry is massive and is growing, and it's very manual and quite analog in the way that it's being produced. We have a potential to disrupt this market.

Speaker Change: So all of fleet is driving shorter runs and we also can see production moving from offshore to near show and two onshore. This of course reflects both in our <unk> direct to government business and also in the direct to fabric business.

Ronen Samuel: So on Direct-to-Fabric, the excitement that we see is actually going after new value applications that are unique, and we can bring huge value to the industry. There are other exciting verticals that we are going after. One of them is the Technical Vertical, another one is Home Deco, and we are going to deep dive into them during our investor event in September. Of course, we continue to see growth in fashion, and there we are focusing on specific territories like India, like China, like Peru, and Portugal.

Ronen Samuel: We are working with few major producers both in terms of brands and for filler or in this market, and there's a lot of excitement. We are in a process to finalize our solution to prove that it meeting the standard of the industry and we are planning to launch it and to scale it in the coming quarters.

Ronen Samuel: There are other exciting verticals that we are going after. One of them is the technical vertical, and another one is Home Decor, and we are going to deep dive into them, doing our investor event in September. Of course, we continue to see the growth also in the fashion, and there we are focusing specific territories like India, like China, like Peru, Portugal. Those are the producing countries, and we are focusing there. We can start seeing customers really utilizing our system for longer runs, replacing the reactive process and being able to deliver products in a much more sustainable way.

Ronen Samuel: Those are the producing countries, and we are focusing there. We can start seeing customers really utilizing our system for longer runs, replacing the reactive process, and being able to deliver products in a much more sustainable way, on time, at a much faster speed to the market, in much larger SKUs, both in terms of fabrics and design, and going into a relatively shorter run versus the analog that needs to print only longer runs.

James Ricchiuti: On time in much faster speed to the market in much larger SKUs both in terms of fabrics and design and going into a relative shorter runs versus the analog that needs to print only longer runs. Great, thank you very much. And you had reiterated your expectation for revenues in the second half to be up 20-25%, so my estimate at the midpoint shows that, at least if I'm doing this right, Q4 will be a return to growth year-over-year. You had mentioned your expectation for consumables to continue to increase sequentially for the back half. Just wondering if you could elaborate on the expectation for return to growth in Q4, is that consumables driven?

James Ricchiuti: Does that also include the impact of all in click? Just wondering if you could elaborate on what I see there. Thank you. Yeah, so what we have mentioned, we get guidance, of course, for Q3 and we have an indication for the H2. In terms of indication for H2, we mentioned very clearly that we see right now a growth in revenue of about 20-25% versus H1. We also said very clearly that we are planning for the full year to be even a positive and to continue to deliver cash for positive for the coming quarters. So this is in terms of the financials.

Ronen Samuel: Yeah, so what we have mentioned, we gave guidance, of course, for Q3, and we gave indications for H2. In terms of indications for H2, we mentioned very clearly that we see right now a growth in revenue of about 20 to 25% versus H1. We also said very clearly that we are planning for the full year to be EBITDA positive and to continue to deliver cash flow positive for the coming quarters. So this is in terms of the financials.

Ronen Samuel: In terms of the growth that we are expecting, a major part of it will come from the growth of the ink. As usual, this is an analogy of our business that H2 is much stronger than H1, and Q4 is much stronger in terms of ink than any other quarter. So you would continue to see the impact of the growth of the supplies both in Q3 and Q4. You should expect to see improvement in growth margin both in Q3 and in Q4. And on top of that, we have a good line of sight for systems that we are going to deliver in Q3 and some of them in Q4.

Ronen Samuel: In terms of the growth that we're expecting, a major part of it will come from the growth in ink. As usual, the seasonality of our business means that H2 is much stronger than H1, and Q4 is much stronger in terms of ink than any other quarter. So you will continue to see the impact of the growth in supplies, both in Q3 and Q4. We should expect to see improvement in gross margin, both in Q3 and in Q4.

Ronen Samuel: And on top of that, we have a good line of sight for systems that we are going to deliver in Q3 and some of them in Q4. We have an important event in front of us in September, which is Printing United, which we are planning to collect orders for as well for the end of Q3 and Q4. And the impact of the all-inclusive click of those units that we are installing right now and planning to install during Q3 and Q4, you will start seeing the impact of it in Q4, but the meaningful impact of those units will come in 2025.

James Ricchiuti: We have an important event in front of us in September, which is the Printing United, which we are planning to collect as well orders for Q4 for the end of Q3 and Q4. And the impact of the all inclusive click of those units that we are installing right now and planning to install doing Q3 and Q4. You will start seeing the impact of it in Q4, but the meaningful impact of those units will come in 2025. Great. Thank you very much.

James Ricchiuti: I'll leave it there.

Brian Drab: Thank you, Mr. James.

Operator: Thank you, Mr. James. Your next question comes from the line of Mr. Brian Drab of Williams.

Brian Drab: Your next question comes from the line of Mr. Brian Drubb of Williams. Please go ahead. Hi. Thanks for taking my question. I just wanted to put maybe just a slightly finer point on that last discussion and last question around the sales guidance. So my understanding, and you've given us enough numbers here to do some math. But if the second half sales are up 20 to 25% from the first half, then we'd have that in dollars. There's that the range of 111 to a little over 115 for the second half, and you gave us guidance for the third quarter.

Brian Drab: Then we'd have, you know, that in dollars, that's a range of 111 to a little over 115 for the second half. And you gave us guidance for the third quarter.

Brian Drab: So you were looking at a fourth quarter that ranges from 59 to 68 million, and I just want to make sure that. You know, that, that math is right and you're looking at, you know, a significant step up in sales from the fourth quarter to third quarter, I guess, Ronen for the reasons that you just spoke about it. Am I doing that, that math in line with? Yeah, the math is correct. And again, I would like to repeat that most of the girls will come from the inside and less from the system side. Although we will install systems, as I mentioned, a quite few of them will be on the all inclusive.

Brian Drab: You know, we're looking at a fourth quarter that ranges from 59 to 68 million, and I just want to make sure that the math is right, and you're looking at a significant step up in sales from the fourth quarter to the third quarter, I guess, Ronen, for the reasons that you just spoke about. Am I doing that math in line with how you're doing it?

Ronen Samuel: Which we cannot recognize the system. When installing it, we of course, recognizing all over time on the impression on the click of being generated.

Ronen Samuel: Okay. Thanks. And then as you go into 2025, you know, you'll of course have this building revenue base from the AIC units that you're putting into the market now. And, you know, more, and then you'll have further orders. I'm just wondering, you know, can you make any comment on how you're feeling about, you know, as we move into 2025 and that typical seasonal, um, down tick that we see in the first quarter or you feel like you might, you know, this year, it might be a different dynamics because you have that momentum.

Brian Drab: Okay, thanks. And then as you go into 2025, you'll, of course, have this building revenue base from the AIC units that you're putting into the market now. You know, as we move into 2025 and that typical seasonal downtick that we see in the first quarter, or do you feel like you might, you know, this year?

Speaker Change: Market now.

Speaker Change: And more and then you'll have further orders I'm. Just wondering if you can you make any comment on how youre feeling about.

Speaker Change: As we move into 2025 and that typical season.

Speaker Change: Seasonal downtick.

Speaker Change: Downtick that we see in the first quarter or do you feel like you might you know this year.

Speaker Change: It might be a different dynamic because you have that momentum.

Ronen Samuel: So, it's too early to discuss 2025. Of course, we are going to share our longer-term view at the event. A month from now, we are going to share with all of you how we see our longer-term view at a high level, and we are going to get into the detail of the all-inclusive and how we see it growing in the coming years. Of course, the intent is to move more into recurring revenue, into a SaaS-based model, and you will start seeing the impact beginning in 2025, but let's leave that to our investor event, which is going to be an important one, where we are going to share the direction of the business moving forward.

Ronen Samuel: So it's too early to discuss about 2025. Of course, we are going to share our longer term view at the event. In a month from now, we are going to share with all of you. How do we see our longer term view in high level? And we were going to get into the detail of the only inclusive, and how do we see it going in the coming years? Of course, the intent is to move more into recurring into a SaaS-based model. And you will start seeing the impact beginning of 2025.

Speaker Change: So it's too early to discuss about 2025 of course, we are going to share our longer term view.

Speaker Change: At the event in a month from now we're going to share with all of you how do we see.

Speaker Change: Our longer term view.

Speaker Change: A high level and we were going to get into the detail of the all inclusive and how do we see growing in.

Speaker Change: In the coming years.

Speaker Change: Of course, the intention is to move more into week, having into a SaaS based model.

Speaker Change: And you will start seeing the impact beginning of 2025.

Ronen Samuel: But let's leave it to our investor event, which is going to be an important one, at which we are going to share the direction of the business moving forward. OK, and then can you just comment on, because I think this is so important, you know, how are you seeing the business develop across, you know, for the Apollo and with the AIC across historically, you know, companies that only do screen printing. And, you know, only use analog screen printers historically, and are you getting their attention more? Can you maybe give us an example or a couple examples of.

Speaker Change: But let's leave it to our investor.

Speaker Change: <unk>, which is going to be an important one which we are going to share the direction of the business moving forward.

Brian Drab: Okay, and then can you just comment on, because I think this is so important, you know, how are you seeing the business develop across, you know, for the Apollo and with the AIC across historically, you know, companies that only do screen printing and, you know, only use analog screen printers historically, and are you getting their attention more, and can you maybe give us an example or a couple examples of...

Speaker Change: Okay, and then can you just.

Speaker Change: Comment on because I think this is so important.

Speaker Change: How are you seeing.

Speaker Change: The business develop a cross.

Speaker Change: For the Apollo and with the AIC across historically.

Ronen Samuel: You know, where that's working. Yeah, so first of all, the answer is absolutely. We already close with few traditional screen printers, some of them with no digital experience. And we have a very strong price by moving forward with screen printers, which are first being introduced to digital. They heard about it, but they thought don't think that the quality is there, the productivity, and of course, the initial cost of the investment. Now that our technology, the Apollo, the max technology meeting the needs of quality, first of all, of the market. Actually, surprising in terms of quality versus the analog screen in many, many fabrics and many designs, like photographic design, we're doing a much better job than screen.

Ronen Samuel: And on top of that, the productivity is reaching to totally different limits. And the run lengths are getting shorter, and with this machine, you need only one operator. It is starting to make a lot of sense to those screen printers. And we see a really good reaction and interest, and almost every dose that we are opening is a dose of me that we have a potential to close. Many of them will come to the event, the investor event. We will have a panel also with customers, so some of them really moving volume from the analog to digital to Apollo.

Ronen Samuel: So Apollo is again, changer both in terms of main powers, only one operator to run the system both in terms of this year and productivity and quality. And now, combining with the ASC model, we really reduce the last barrier and the intention. As you know, we mentioned on the previous call that this year we are going to deliver 15 systems. Next year, we are planning to double the number of systems that are following to the market. We are already collecting orders for 20, 25, and it looks very, very good. So the issue that I see right now is not the demand.

Ronen Samuel: We need to ramp up; we need to make sure that the product, the liver, what is promise to deliver at this stage, it looks fantastic.

Brian Drab: And I just want to also just close with my questions by just saying congrats on, and you're sensitive to using the name of the Global Strategic, but it's mentioned a hundred times in these warrant agreements, but some people may have lost track of this, but congrats on hitting $400 million in cumulative sales to Amazon. As Greg, I think, alluded to it, you know, I have questions.

Brian Drab: And I just want to also just close with my questions. We're just saying congrats on, and you're sensitive to using the name of the global strategic, but it's mentioned a hundred times in these war agreements. Some people may have lost track of this, but congrats on hitting 400 million accumulative sales to Amazon, as Greg, I think, alluded to it. You know, I get questions often on you regarding how your business with the global strategic customer is, and that's a real milestone. So congrats on hitting 400 million. Thank you very much.

Brian Drab: And I just want to also just close.

Erik Woodring: Your next question comes from the line of Mr. Erik Woodring from Morgan Sandley. Please go ahead. Great. Thank you very much for taking my questions. I just have to maybe to touch on, you know, a number of the questions that are focused on 4Q here, again, just to be even more specific. I think Ronen, what you're guiding to is perhaps roughly 14% year over your growth at the midpoint in the December quarter, and in adjusted even down margin of low double digits. Obviously, a significant improvement from recent performance, especially in the context of, you know, effectively since I'm guiding below consensus.

Operator: Thank you very much. Your next question comes from the line of Mr. Erik Woodring from Morgan Stanley. Please go ahead.

Erik Woodring: Great. Thank you very much for taking my questions. I just have two.

Erik Woodring: Maybe to touch on a number of the questions that have focused on 4Q here, again, just to be even more specific, I think, Ronen, what you're diving into is perhaps roughly 14% year-over-year growth at the midpoint in the December quarter and an adjusted EBITDA margin of low double digits. Obviously, a significant improvement from recent performance, especially in the context of, you know, effectively since ITMA, guiding below As we sit here today, I guess, why should all of us on the call, whether we're covering analysts or those that are following the company, look at that guidance and say,

Ronen Samuel: As we sit here today, I guess why should all of us on the call, whether we're covering analysts or those that are following the company, look at that guidance and say, we believe, we believe in we have confidence in that guidance. What can we take away from your comments that help us gain guidance in that commentary, and that 90 days from now, you know, we won't be talking about further macro issues and an additional guide down, and then I will follow up. Thanks. No, I said excellence and direct questions. The way I will approach it is as follows.

Ronen Samuel: No, it's an excellent and direct question. The way I would approach it is as follows. Look, we went through a very tough two and a half years, a big change in our market that we were addressing. We were addressing, mainly, customized design. This was most of the business of Kornit, Kornit's business today, on top of the customized design, but finally, the utilization is getting to a different level. We are addressing totally new markets, if it's fashion, if it's the screen replacement, if it's sports, home decor, et cetera.

Ronen Samuel: Look, we went through it very tough to in a few years. A big change in our market that we were addressing. We were addressing mainly the customized design. This was most of the business of Cornit, Cornit business today on top of the customized design. But finally, the utilization is getting to a different level. We are addressing a totally new market. If it's the fashion, if it's the screen replacement, if it's the sports, a home decor, etc.

Ronen Samuel: But let's talk a bit about this year, the past, versus talking about the future, and maybe it will be a confidence. So what did we say in the beginning of the year? In the beginning of this year, we said that we are going to deliver 15 Apollo this year. We are spending now, and we have full confidence that we are going to deliver it. It's a breakthrough product. And we are already focusing on collecting orders for 2025. This is the most destructive product that ever been in this market. What else we said? We started talking about the IC model in the beginning of the year.

Ronen Samuel: You know what? Let's talk a bit about this year, the past, versus talking about the future, and maybe it will be confident. What did we say at the beginning of the year? At the beginning of this year, we said that we were going to deliver 15 Apollos this year. We said that we believe that the market will improve, and we will see it through the utilization of our customer's system, the amount of impressions, and the amount of ink.

Ronen Samuel: I remember there was a lot of confusion. And we said in the beginning that maybe seven out of the 15 system of Apollo will be all inclusive. Now we can say that the probably ten or more of the Apollo's that we are delivering this year will be on all inclusive. And it's so successful, and we are entering to new markets and incremental volumes that we are opening to the earth. We said very clearly in the beginning of the year that we continue to cut costs, and our op-ex is going to be the range of $107 million for the year.

Speaker Change: Beginning of the is that we continue to cut cost and our opex is going to be the range of $107 million for the year. We are tracking it. Although we had one time negative impact. This quarter, we are still committing to that this year will be $20 million lower.

Speaker Change: Opex versus last year, and we're cutting costs also relating that to the Cogs and you can see it in the gross margin.

Ronen Samuel: We said also in the beginning of the year that this year will be a positive cash flow for the entire year, and we are delivering on that. And we said that we are going to improve growth margin, quarter by quarter, and this quarter we deliver 48%. You will see an improvement in Q3 and Q4. And EBITDA, we said that we are going to improve EBITDA, and for the full year we are going to be positive. You can see the improvement. If you take the $1.5 million impact of the one time that we had this quarter, it's a break even for this quarter.

Speaker Change: We said also at the beginning of this year, what would be a positive cash flow.

Speaker Change: For the entire year and we are delivering on that.

Speaker Change: And we said that we're going to improve gross margin quarter by quarter and this quarter, we delivered 48 or.

Speaker Change: <unk> and <unk>.

Speaker Change: You will see an improvement in Q3 and Q4.

Speaker Change: And.

Speaker Change: EBITDA, we said that.

Speaker Change: We are going to improve our EBITDA and for the fully we are going to be positive you can see the improvement if you take the $1 5 billion dollar impact of the one timers that we had this quarter its a breakeven.

Speaker Change: For this quarter.

Ronen Samuel: We said that we believe that the market will improve and we will see it by the utilization of our customer of the system, the amount of impression and the amount of ink. And we clearly see it; quarter by quarter, customer utilization is becoming better. Even though we are upgrading the system with more utilization to the Atlas Max Plus or to the Atlas Max and the Atlas Max Plus, providing them additional capacity. We have said that we are going to release the Max Plus technology, which is going to bring the Atlas Max even further to another between 15 to 20% of utilization for our customers, and we deliver it, and this quarter substantial amount of units we are planning to continue to upgrade in Q3 and Q4.

Ronen Samuel: And we clearly see that, quarter by quarter, customer utilization is becoming better. Even though we are upgrading the system with more utilization of the Atlas Max Plus, or, first of all, the Atlas Max, and the Atlas Max Plus Plus providing them additional capacity.

Ronen Samuel: So I think that the track record that you see from the team here, that we are executing it to what we are saying in the last few quarters, we met the guidance that we gave to the market. So hopefully and confidence that we will continue to deliver what we are saying to the market. Thank you, Ronan. That was an honest answer. And again, my feedback is you write a lot of what you said you would deliver. You are delivering on it.

Erik Woodring: So I just want to make sure that the expectations have not been set too high to maybe mask all of the progress that you have made this year. That was some of the point of my of my question.

Lauri Hanover: Maybe just on a follow-up. Just in terms of the buyback, I realize you will save most of the details for on-capitation for the investor day on the 10th of September. We are all looking forward to. Can you maybe just help us understand, maybe mechanically, just the timeline that it will now take to go back to the Israeli courts, get some form of approval. You know, I am not asking necessarily for how much you would increase your authorization by or how your capital allocation plans will change, but simply the process of getting that authorization, if there is a timeline that we can think about, at least initially, so we can all maybe make estimates that maybe we will get updated on September 10th.

Lauri Hanover: And that's it for me. Thanks. Hi, Eric. Let me take that question. So first of all, our existing repurchase authorization expired during the second quarter, as I mentioned, and with the new regulations, there is no longer a need for court approval. All other elements of the regulation remain. You still have a notification, a 30-day notification period, et cetera, et cetera.

Lauri Hanover: Hi Erik, let me take that question. First of all, our existing repurchase authorization expired during the second quarter, as I mentioned, and with the new regulations, there is no longer a need for court approval. All other elements of the regulation remain. You still have to notify, a 30-day notification period, etc, etc. So we are now navigating this process, and as you noted, we will be looking forward to sharing with you a more comprehensive capital application strategy in September.

Erik Woodring: So we are now navigating this process, and as you noted, we will be looking forward to share with you a more comprehensive capital application strategy in September. Okay, Serena. Thanks so much, and good luck, guys. Thank you.

Erik Woodring: Okay, fair enough. Thanks so much and good luck, guys.

Erik Woodring: Thank you, Mr. Eric.

Operator: Thank you, Mr. Erik. Your next question comes from the line of Mr. Chris Moore from CJC Securities. Please go ahead.

Chris Moore: Your next question comes from the line of Mr. Chris Moore from CJC Securities. Please go ahead. Hey, guys. Thanks for taking a couple of questions. So maybe get back to AIC for a moment. So one million in annual revenue on the Apollo. Any kind of give a reasonable gross margin range for that million dollar minimum?

Christopher Moore: Hey guys, thanks for taking a couple of questions. So maybe we can get back to AIC for a moment. So $1 million in annual revenue on the Apollo. Can you kind of give a reasonable gross margin range for that million dollar minimum?

Chris Moore: So the intention, first of all, to share more information on the all-inclusive in our event in September. What you can assume is that we build it the model in such a way that our gross margin will be at least as good as the capital model is not better. So you will see the results of it during the meeting, during the investor event. Got it, that's helpful. And in terms of the AIC with the Atlas Max, is there a minimum revenue number associated with that? Yes, of course, and we will share it at the event as we are starting the pilot right now.

Ronen Samuel: Yes, of course, and we will share it at the event as we are starting the pilot right now. I prefer to keep it confidential at this stage.

Chris Moore: I prefer to keep it confidential at this stage. We will share it at the event in September. Got it. And in terms of the kind of the customer profile, you walk through that with the Apollo AIC. Is the typical customer that you're approaching on the Max AIC? Is that much different from the Apollo? Is that even more as interest rates come down? Is that going to be less of an issue since the cost is not what the Apollo is? Just trying to understand who you're talking to there. Yes, it's different. Of course, with the Apollo, we are focusing on big screen printers and big retailers that they have massive volumes that they need to move from analog to digital because they're getting shorter and shorter runs.

Ronen Samuel: Yes, it's different. Of course, with Apollo, we are focusing on big screen printers and big retailers that have massive volumes that they need to move from analog to digital because they're getting shorter and shorter runs, and they need to deliver them at speed to the market. We are talking about hundreds of potential customers for the Apollo. With the Atlas Maxis, we are targeting smaller screen printers, but they might have two or three carousels at most, and they would like to move some of the volume or the entire volume into digital, again, to meet time to market, speed, quality, and better ROI, and with much less manpower. There, we are talking about thousands of potential customers. So, these are the differentiators, and we will again provide much more details on the events in a month.

Ronen Samuel: And they need to deliver them in speed to the market. We are talking about hundreds of potential customers for their Apollo. With the Atlas Maxs, we are targeting smaller screen printers that they might have two or three ourselves only. And they would like to move some of the volume or the entire volume into digital again, to me, time to market, speed, quality, and better ROI, and with much less manpower. There, we are talking about thousands of potential customers.

Ronen Samuel: So this is the differentiators, and we will again provide much more details on the events in a month. Got it.

Christopher Moore: Got it. And I'm guessing this last one falls in that category as well. But, obviously, the model is changing to more and more recurring revenue, which is a great thing, obviously, with the AIC. Is there a target? of overall revenue a couple of years out?

Chris Moore: And I'm guessing this last one falls into that category as well, but just that it obviously the model is changing to more and more recurring revenue, which is a great thing obviously with the AIC. Is there a target, you know, kind of range in terms of recurring revenue, a percentage of overall revenue a couple years out? Tells on the event that I cannot share it right now, because we have targets internally and we have the model internally, and we will share a high level of the model with all of you. Fair enough. All right, I appreciate it, guys.

Chris Moore: Thank you very much.

Chris Moore: Thank you very much, Mr. Chris Moore.

Operator: Thank you very much, Mr. Chris Moore. There are no further questions at this time. I'd now like to turn the call back to Mr. Ronen Samuel, Chief Executive Officer, for Final Calls and Comments.

Operator: There are no further questions at this time.

Ronen Samuel: I'd now like to turn over the call back to Mr. Ronen Samuel.

Speaker Change: Instead of running from well Chief Executive Officer for final closing comments.

Ronen Samuel: She's executive officer for final closing comments. Yeah, so thank you all for joining today's call. Before we discolored, I would like to remind everyone again, and to give the attention to the announcement we just released this morning and on this evening call relating to the investor event in September 10th in Vegas. We have a great day, Glender, with a lot of details. We're going to discuss the market situation. How do we see the market moving forward? I'll go to market strategy, capital allocation, AAC, and much, much more. We really hope to see you there. It will be beneficial.

Ronen Samuel: Yeah, so first of all, thank you all for joining today's call. Before we disconnect, I would like to remind everyone again and to give attention to the announcement we just released this morning and on this earnings call relating to the investor event on September 10th in Vegas. We have a great day planned there with a lot of details. We're going to discuss the market situation, how we see the market moving forward, our go-to-market strategy, capital allocation, AAC, and much, much more.

Speaker Change: Yeah. So first of all thank you all for joining today's call.

Speaker Change: Before we disconnect I would like to remind everyone again.

Speaker Change: And to give the attention to the announcement, we just released this morning and in this earnings call relating to the Investor event in September 10th in Vegas.

Speaker Change: We have a great day plan, there with a lot of details.

Speaker Change: We're going to discuss the market situation, how do we see the market moving forward our go to market strategy capital allocation AAC and much much more.

Ronen Samuel: We really hope to see you there. It will be beneficial. There will be many of our customers that will be paneled with key customers, with demand generators. We're going to talk about future technologies. So please, if you can join us in person, please join us. If not, be on the call. It will be an important day. Looking forward to seeing you all. Thank you for your questions.

Speaker Change: We really hope to see you there it will be beneficial there will be many of our customers there would be panel with with key customers.

Ronen Samuel: There will be many of our customers that will be paneled with key customers with the many generators. We're going to talk about future technologies.

Speaker Change: Customer with demand.

<unk>.

Speaker Change: We're going to talk about future technologies.

Ronen Samuel: So please, if you can join us by person to join, if not, beyond the quality will be an important day. Looking forward to see you all. Thank you for your questions.

Speaker Change: So please if you can join us by percentage or and if not be on the quality. It will be an important date looking forward to see you all thank you for your questions.

Operator: Thank you, Mr. Ronen Samuel.

Mr Robinson: Thank you Mr Robinson low labor content alone.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. I hope you all have a great day.

Your conference call for today, we thank you for participating.

Mr Robinson: Could you please disconnect your lines.

Speaker Change: Have a great day.

Speaker Change: [noise].