Q1 2025 Kornit Digital Ltd Earnings Call
Speaker Change: [music].
Greetings and welcome to Accordingly, Digital's first quarter 2025 earnings conference call.
As a reminder, this call is being recorded.
I would now like to turn the conference over to our host Mr. Javid mainland Investor Relations for Corny digital Mr. Mason you may begin. Thank you operator, good day, everyone and welcome to Courtney Digital's first quarter 2025 earnings conference call.
Speaker Change: Joining me today are chief Executive Officer, Rona, and turmoil and Lori handover, Accordingly, Chief Financial Officer.
Speaker Change: For today's call Ronan will provide comments on the first quarter of 2025 and provide an update on our market. Laurie will then review the first quarter results and provide our second quarter outlook before we open it up for Q&A.
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 1995, and other U S Securities laws will be made on this call before.
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.
Speaker Change: <unk> 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 Change: I encourage you to review the Companys filings with the Securities and Exchange Commission.
Speaker Change: Leading the company's annual report on form 20-F filed with the SEC on March 28, 2025, which identifies specific risk factors that could cause actual results to differ materially.
Speaker Change: 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 Change: Additionally, the company will be making reference to certain non-GAAP financial measures on this call the.
Speaker Change: <unk> 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.
Ronen: At this time I'd now like to turn the call over to Ronen Ronen.
Ronen: Good morning, and thank you for joining us.
Ronen: Pleased to report that <unk> met expectations in Q1 and delivered on our commitment even as we operated in an uncertain macro environment with new threat policy risks and soft consumer sentiment revs.
Ronen: Revenue came at $46 5 million and adjusted EBITDA margin at minus eight 4% both within our guidance. We also generated positive cash flow from operations, demonstrating the strengths of our model and disciplined execution, but the real story. This quarter lies beyond the <unk>.
Ronen: The apparel industry is undergoing one of its most significant disruptions ever.
Ronen: And there's never been a better moment for core neat is pioneering digital transformation to lead global supply chains have been optimized for low cost offshore barrel production, which no longer meet the demands of today's consumer.
Ronen: Expect instead gives applications endless variety fast delivery and sustainability.
Ronen: Brands and retailers are recognizing that producing closer to the consumer in smaller runs and only what actually sells is essential. These transformational chief is no longer optional is becoming urgent and cool need digital platform. The leaves us the agility that test.
Ronen: And needs to win in today's marketplace, minimizing waste freeing up working capital and improving margins.
Ronen: Recent trade policy developments, including proposed U S tariff on imports from Mexico, China, and other low cost regions. Further emphasizes this needs to change our customers, especially brands and retailers.
Ronen: Thinking their supply chains.
Ronen: Turning to call neat and now fulfillment partners to localize production.
Ronen: We are also well positioned to work through this set of circumstances, because most of our manufacturing is based in Israel.
Ronen: Other than China, or other heavily targeted regions and we are not significantly reliant on tariff exposure imports, we have already taken proactive steps to mitigate potential impacts and based on what we know today, we anticipate only a modest cost effect if new.
Ronen: Charlie.
Ronen: In fact, today's environment only reinforces our strategic positioning that said, we remain vigilant and the ultimate impact will depend on how trade policies evolve.
Ronen: Regulatory change is already reinforcing this shift the U S closure or the de Minimis loophole on May 2nd which had previously allowed sub 800 packages from overseas to enter Tavis III is already disrupting the direct to consumer flow of low cost.
Ronen: Government from China.
Ronen: Brands are seeking alternative supply chains closer to the market supported by early feedback from our customer base, which points to increase activities in the U S. As a result, while macro conditions delay a few planned system purchases in Q1, we have seen.
Ronen: And much more powerful force at work growing conviction among both brands and fulfill as that now is the time to move to on demand mass production. This year.
Ronen: Is no longer theoretical our technology has proven the ecosystem is in place and our customers are acting executives are telling us their organizations must adapt or risk falling behind and they are choosing who need a partner to lead that transition.
Ronen: Let's now dive into the three key execution priorities that time, but I think we'll need a formation and long term growth.
Ronen: First is the successful adoption and scale up of their portal system, which is key to our breakthrough into mass production.
Ronen: Since launch our polo has delivered remarkable growth in impressions, especially on longer production runs, which have traditionally been an analog pronghorn Apollo unlocking a high volume segment that had long resisted digital and we are now engaging with key in printers.
Ronen: That previously wouldn't have considered this transition.
Ronen: Turns out is that we are now seeing this traditional screen printers running jobs.
Ronen: Houses of units on the Apollo something previously unthinkable in digital this demonstrates the strong economics and scalability of the platform. Additionally, customers are telling us that the polo is replacing the need for at least three catalysts does kick in places.
Ronen: And then enabling them to reduce their head count by 15 to 20 employees daily.
Ronen: Delivering both operational simplicity and significant cost savings.
Ronen: Paul a successful life debuted last week its first lien was an important milestone.
Speaker Change: <unk> is one of the industry, leading fill screen focused events and now participation allow industry leaders to experience a polo in action the conclusion from attendees was clear and compelling.
Speaker Change: Following moved the compromises that they've held digital BEC. It delivers we're still skiing as needs in emerging marketplace labor saving automation high speed throughput and still screen level retail quality, all without waste setup time.
Speaker Change: Oh inefficiencies of Antelope.
Speaker Change: Our pipeline continues to expand with many new customers and early adopters are already added additional systems or planning to follow on orders clear validation of the Apollo performance and the momentum of polo is experiencing is a key part of our broader strategy.
Speaker Change: <unk> shift to scale beyond them customized design segment and into mass production, leveraging our complete maxx portfolio, including Apollo Atlas Max I've lost my poorly and Presto Max two delivered the speed quality and the agility the markets.
Speaker Change: Mens intra.
Speaker Change: Interest is growing quickly from last fulfill as global brands and retailers seeking to replace legacy models and bring manufacturing closer to the consumer.
Speaker Change: Second is accelerating the adoption of our all inclusive click AIC model. This printing as a service support is disruptive in hardware centric industry and is gaining meaningful traction AAC is designed to lower the barrier of entry to do.
Speaker Change: Digital for our customers changing how's the bi operate and grow with us and aligning our success with theirs.
Speaker Change: At the end of Q1, we reached a significant milestone.
Speaker Change: Annual recurring revenue.
Speaker Change: From AIC contract reached $14 5 million these are multiyear contracts.
Speaker Change: So that 14.5 represents a stable and growing base of recurring revenue contractually locked in for multiple years to come.
Speaker Change: This significant milestone validate our strategy of emphasizing recurring revenue streams and it's only the beginning.
Speaker Change: Combined with our Lee of calling consumable and service revenue today over 80% of core needs total revenue is recurring or highly predictable driven by a C consumable and service contracts.
Speaker Change: Our pipeline for this model continues to expand as more customers see the benefits and we expect AIC to grow meaningfully throughout 2025, driving a larger portion of our revenue and fostering more win win partnership with our customers.
Speaker Change: Third is our impression growth both from our existing installed base and increasing demand from new channels. This quarter, we began reporting impressions on a trailing 12 month basis and reached a record 222 million impressions.
Speaker Change: 10% compared to the previous 12 months period, driven by a strong gas system utilization and continued digital adoption each impression.
Speaker Change: Late in the week, having all Leo calling as it had been.
Speaker Change: New and validate the growing value of our platform to support this growth. We are focused on connecting demand with available production capacity bridging between brands retailers and demand generators with our own demand global fulfillment network that connection.
Speaker Change: Of demand generation with fulfillment was the core theme at connections.
Speaker Change: Our flagship event.
Speaker Change: Last month in Miami, what started as a small gathering has become a sold out industry summit, bringing together hundreds of leaders from fashion retail tech and manufacturing the takeaway was clear the shift to new show all show on demand production in masks.
Speaker Change: Quantities is happening and KOL neat is at the center of it a major highlights from connections is our newly announced strategic partnership with M. A S asthma.
Speaker Change: U S subsidiary of M. A S holdings, one of the world's leading supply chain partners to top global fashion and retail brands, including Victorias Secret PVH, Nike Lululemon get brands and Makin Spencer MFS Acme.
Speaker Change: He is now using <unk> technology for short run replenishment in the U S. Enabling faster response time, helping brands reduced markdowns and avoiding costly store counts.
Speaker Change: This partnership is a major validation of our platform's ability to support high volume time sensitive production at scale and a key step towards reshaping global apparel supply chain. We have also announced our partnership with <unk>, a leading print on demand.
Speaker Change: <unk> now connected to our global fulfillment network via coordinate ex <unk> is leveraging our infrastructure to route consistent high quality orders into our installed base has been demand generators.
Speaker Change: Reliable on demand production across geographies and categories in parallel adoption is growing of course digital native platforms like Kasper.
Speaker Change: Led by both deep public Zumiez Blue tomato life is good.
Speaker Change: All leveraging konate, Max technology to fulfill faster locally and with consistent quality.
Speaker Change: So as we look ahead, yes macro uncertainty remains but there's a formation of the apparel industry is undeniable the need for speed agility and relevance is the new standup coordinate is leading this change with the right technology a proven.
Speaker Change: This model and the operational scale to support our customers' evolving needs.
Speaker Change: Based on what we see today, we continue to expect the full year for revenue growth adjusted EBITDA profitability and positive operating cash flow, while sales cycles may remain longer in H. One the momentum we are building a course of Paulo, AAC impressions and demand generation.
Speaker Change: Ration position us well for stronger growth in the second half of 2025, historically conatus, primarily serve the custom design segment of the apparel industry focused largely on one off impressions. This niche is driven most of the <unk>.
Speaker Change: <unk> produced on our systems to date, but the market. The head is exponentially larger the mass production space for <unk> and the 1000 units represent an estimated $4 5 billion impressions globally with our polo, our Max technology portfolio.
And the proven economics of the AAC model, we know if the green quality cost efficiency and business readiness to go after this massive opportunity and.
Speaker Change: And we are not just aiming for it we are starting to capture it customers are shifting use cases are expanding and volume is moving the opportunity here is enormous and co need is advancing with clarity conviction and purpose. We have not been active we have.
Speaker Change: Playing offense and leading the transformation of how fashion is created consume and delivered and that future is all demand digital and much more sustainable.
Laurie: Thank you I will now turn the call over to Laurie.
Speaker Change: Laurie.
Laurie: Thank you ronen and good day to everyone.
Laurie: First quarter revenues were $46 5 million within the guidance range of $45 5 million to $49 5 million we provided in February.
Laurie: Year over year, we saw growth in product revenues, primarily attributable to the expansion of our AIC program. As a reminder, AIC revenue captures the value of our consumables system and service used by customers during production.
Laurie: Service revenue declined year over year, as we shipped fewer upgrades of the Atlas smacks, partly offset by a significant number of upgrades to Max plus which sell at a comparatively lower ASP.
Laurie: Moving to margins first quarter non-GAAP gross margin reached 45, 2% compared with 37, 5% in same period last year.
Laurie: The year over year improvement is largely attributable to no warrants impact this quarter, but it was also benefited by operating efficiencies.
Laurie: This quarter, we also had a onetime benefit from a materials recovery effort, which added approximately two percentage points to service margin.
Laurie: Looking at operating expenses total first quarter non-GAAP operating expenses were $27 4 million a decrease of <unk> 3 million or about 1% from $27 1 million in the same period last year.
Laurie: Moving to EBITDA.
Laurie: First quarter adjusted EBITDA was negative $3 9 million. This was an improvement versus the negative $7 8 million, we reported in the same period last year.
Laurie: Adjusted EBITDA margin for the first quarter of 2025 was negative eight 4% within the guidance range. We provided in February.
Laurie: Our balance sheet remains robust with our quarter end cash balance, including bank deposits and marketable securities.
Laurie: Ending at 513 million.
Laurie: Operating cash flow was $5 8 million compared with 4 million in the same period last year.
Laurie: Cash flow less capital expenditures and investment in equipment on lease for AIC in Q1 was $2 million compared with $2 7 million in the same period last year.
Laurie: Moving to our share repurchase activity.
Laurie: During the first quarter, we completed our 75 million dollar accelerated share repurchase program through this program, we repurchased approximately two 5 million shares at an average price paid at $30 40 per share.
Laurie: We repurchased an additional 330000 shares through a traditional open market repurchase in the quarter for an average price paid of $23.45.
Laurie: This brings our total repurchases since 2023 to $5 9 million shares for a total consideration of 148 million, reflecting an average price paid $24.76.
Laurie: As Ronen mentioned, we also began disclosing two new metrics this quarter.
Laurie: First impressions or the number of prints produced unquote need solutions. This metric is derived primarily from data reported through our connect software, which is installed on the vast majority of our newer D T G and roll to roll systems in the field.
Laurie: For strategic accounts that do not make use of connect we approximate impressions based on consumable shipments and average ink laid down per impression.
Laurie: Similar approach is used to convert square meters printed on a roll to roll systems two impressions.
Laurie: The second new disclosure is a R. R from AIC.
Laurie: We calculate this figure by multiplying the minimum annual volume commitment by the related price per impression for each contract. The sum of these individual contract a RR calculations is our reported figure.
Laurie: Contracts are only considered in this calculation once the system ships.
Laurie: Turning to second quarter guidance.
Laurie: Based on the current macroeconomic environment. We currently expect second quarter revenues to be between $49 million and $55 million and adjusted EBITDA margin to be in the negative 4% to positive 4% range I will now turn it back over to Ronan to open up the call for Q&A.
Ronan: Thank you Laurie operator, we are now ready to get the question.
Ronan: Thank you we will now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up here.
Ronan: Handset before pressing the star keys.
Ronan: Once again Thats star one at this time.
Ronan: One moment, while we poll for our first question.
Speaker Change: The first question comes from Greg Palm with Craig Hallum. Please proceed.
Greg Palm: Yeah, Hey, everyone. Thanks for.
Greg Palm: Taking the questions I guess I wanted to just start with maybe just a broader discussion on on the backdrop and what we've been talking about this transition to screen for a while especially you know over the last six to nine months, but a lot's changed even more recently with tariffs and trade supply chains et cetera. So what what are you seeing what.
Greg Palm: Are you hearing from customers just given what's occurred here in the last four or five weeks.
Speaker Change: Yes, Thanks, Greg.
Greg Palm: So I will start by saying that the market.
Speaker Change: Fashion textile market is growing for probably the biggest disruption ever.
Speaker Change: This is the second time this market is going full dispatch in the last five years, and we will relate into many of the trends.
Speaker Change: That's happened this market, but now.
Speaker Change: Those trends become super relevant and we see it in the market first of all we see the consumer consumer would like instant gratification endless variety.
Speaker Change: Fast delivery this is a must.
Speaker Change: Using the old model.
Speaker Change: Production mass production in low cost countries like China trying to forecast what the consumer would like to get the next day is impossible you have to ship.
Speaker Change: This old model, creating a one trillion dollar all marked down so far.
Speaker Change: Wei.
Speaker Change: Massive inventory, which is the biggest headache for the brands and retailers that they have to change now add on top of that the tariff the minimis closure of the Luke all all of this creating massive disruption and we start to see grants retailers.
Speaker Change: Are really moving and looking to connect to local manufacturing in order to become relevant to reduce their inventory and markdown.
Speaker Change: What else do we see we are talking to many brands right now in retailers in every board room of those brands. The main discussion right now how do we change the supply chain they cannot take come again to the investors.
Speaker Change: Public and say we didn't change this is the second time that happen to them.
Speaker Change: And we see this more to also talking with us and coordinate is playing a major role in connecting them to our customers to the full <unk> and I'm going to touch on <unk>.
Speaker Change: In a minute as well.
Speaker Change: What happened is as well and now is that for the first time. There is a technology that's been really captured the mass production. What coordinate proved is weak that Paulo with the Max technology. We can go after mass production customer are using the system.
Speaker Change: Ronnie housing of Brian Lynch on each one of them showing there.
Speaker Change: The capability the LOI and the cost effectiveness of this we are going after and massive market, which is a $4 5 billion in question below the 1000 and now our technology can capture this.
Speaker Change: Market share.
Speaker Change: We've seen many net new customer.
Speaker Change: The growth that we see right now with Kony is mainly coming from screen printers that are ethane.
Speaker Change: Digital technology, our portals and match technology for the first time is it in U S is it in Europe or in Asia. This is most of the goals that we have and of course the a C. Moore then is really accelerating the shift to move to on demand to move to onshore production Neil Shah.
Speaker Change: Production makes it much easier for new players to enter to the market.
Speaker Change: All of the as a proof point to show a company like.
Speaker Change: Deciding to change and help major brands in the U S to move to change the supply chain into all the men to enable them to reduce the markdown to be more relevant to bring faster product to the market show that what we have discussed for me.
Speaker Change: Many many years now is being accelerated and we see the proof point with mask and few others.
Yeah makes sense.
Speaker Change: Helpful Helpful color.
Speaker Change: I am not sure if you were alluding or hinted but can you just talk about that that the Apollo placement number for the year versus previous expectations for 30, I know you'd mentioned kind of longer sales cycles, and some delayed placements in <unk> and <unk>.
Speaker Change: Q1, but what are your thoughts for the year and as with all this you know you know sort of macro stuff is that impacting the timing of that 30 at all.
Speaker Change: Yeah. So first of all I would start by saying the.
Speaker Change: About that all of the feedback that we're getting I won't get into your question.
Speaker Change: So Paulo.
Speaker Change: Feedback we are receiving from customers that are using it and from customers that looking into efficient bestbuy or other event that we have.
Speaker Change: Is it towards is a game changer, it's a game changer for the industry. Both in terms of quality in terms of automation in terms of the pullbacks of capability in terms of course, we see customers existing customers already bought one system by in the second third and even more systems our pipeline is getting.
Speaker Change: A big gain but the interesting part is that our pipeline now is mainly build or net new customers are coming from the screening market. Many of them for the first time entering data and understand that they have no other way to fulfill what advanced consumer.
Speaker Change: You may want to when the customer wants in terms of their agility and their Paulo, and Max technology is the right technology for them.
Speaker Change: We also see many of them using their colo for long run really really long run I'm talking one of the consequent treated more than 10000.
Speaker Change: Governments state governments on their portal and they have also screen and they understand it more viable to do it on their Paulo, so really seeing that.
Speaker Change: The cost effectiveness of it.
Speaker Change: And they're also telling us that Paulo actually replacing three county sale.
Speaker Change: And reducing each of Paulo, reducing something.
Speaker Change: 15 to 20 head count So you can make just safety.
And all of that we believe that Theyre Paulo and match technology really opening for core need the opportunity to go after the mass production market, which is the $4 5 billion. This is relatively niche market that we were playing till now which is the key.
Speaker Change: Customized designs that we we're leaving it and continue to lead but now the opportunity is much much bigger as for the expectation for this year, we still expect to deliver approximately 30 systems. This year, we have a very strong pipeline, it's true that at least one customer.
Was planning to buy multiple systems decided to delay.
Speaker Change: The process to a later stage.
Speaker Change: But our pipeline is filled and continue to be filled by net new customers and also existing customers, mainly focusing on three main places, but replacement on incremental volume and we are optimistic about the 2025 and the future of therefore.
Speaker Change: Awesome, well sounds like a lot of exciting things going on so I will leave it there best of luck. Thanks.
Speaker Change: Thank you.
Speaker Change: The next question comes from Erik Woodring with Morgan Stanley. Please proceed.
Erik Woodring: Great. Thanks, so much guys.
Erik Woodring: Good morning, and thank you for taking my questions.
Speaker Change: Laurie I, obviously appreciate the new disclosure and not to mention the other disclosures I think it's extremely helpful for all of US and your investors can you maybe just unpack. This they say are our number for us a bit so 14, and a half million dollars a day RR I believe thats Apollo.
Atlas I think the minimum for each product I think Atlas minimums annually, our 300 K in Apollo is $1 million. So just.
Speaker Change: Units and AIC for Apollo versus that lesson.
Speaker Change: You guys talked about that growing next year is there any way you could add a little bit of context to that to help us understand just how much we could think about a I see growing through the year. Please and then I just have a quick follow up thank you.
Eric: Eric I would start.
Speaker Change: I'm sure we will.
Eric: If I Miss anything.
Eric: So.
Eric: In General I would love to report that these data and we are very pleased to see where do we stand by the end of Q1. This is a mix of apollo's.
Eric: Atlas Atlas macrophage at Atlas matched poorly.
Eric: There is a mix we are not reporting exactly what is the mix.
Eric: I can tell you is exceeding our expectation in terms of the era, where we are today more encouraging.
Eric: We have a very very strong pipeline for the AAC specifically already now in Q2, we are delivering in Q1, we delivered even more than what we expected as I mentioned.
Eric: So for the rest of the year you will see continued growth.
Eric: On the AD now the AI.
Eric: Is the minimum commitment that customers are going to deliver on each one of the system per the contract for one year its base of the minimum volume commitment multi power by the clinic right.
Eric: <unk> customers.
Eric: You touched on a number I would say, it's not exactly accurate it's close to what you said.
Eric: But is.
Eric: Shifting between long lines to salt run so it's a bit more complex than that but you are not far away from that what we expect that this AIC we already saw.
Eric: The contribution in Q1 of AAC.
Eric: The contribution in Q2 will be larger than Q1 and in H. Two it will be very very meaningful contribution to our revenue the AAC and therefore this is one reason why we believe that <unk> will be a much stronger than H one.
Eric: Our business.
Eric: When we have anything to add.
Eric: Hi, Eric.
Eric: Thanks.
Eric: No that was perfect. Thank you. Thank you rod.
Speaker Change: Maybe just a follow up in any kind of.
Eric: Leveraging the first question as well which is.
Eric: I here you can see the data and the impression that you can you can see the data and IRR here from AI, Hey, I see and I think we can all kind.
Eric: Can you think holistically about why the shift to on demand is urgent.
Same with the tailwind from it for example closing the de Minimis loophole.
Eric: I guess my question is like.
And in.
In a meaningful way how long should we expect for these catalysts to play out meaning are you seeing the benefits here immediately from a revenue and margin conversation or is this more conversations that are taking place today and therefore this is stuart.
Speaker Change: Significant opportunity, but longer tail than that it just takes multiple quarters or multiple years to get some of these customers over the finish line and obviously growing nicely, but I just want to make sure I kind of understand the pace at which we could see some of these tailwind really start to play out for your company.
Eric: And that's it for me Thanks again Goodbye for you guys.
Eric: Yes. This is.
Speaker Change: Very good question Eric.
Eric: And you know we are not providing.
Eric: Very detailed guidance, but what I would say two things one.
In our Investor event in September.
Eric: We gave an indication where do we see the growth of the of the business for the next five years.
Eric: And we said that we will reach.
Eric: Very close to the $500 million.
Eric: So you can see versus where we are today versus the impression of where we expect the impression going into the next five years now.
Eric: Part of the growth some of the growth we see short term, but also their Paulo, the match technology getting into the mass production with skin Treaters. We already see is very very clear. We also see some retailers that are changing the business model and moving theoretically and growing with us.
Eric: The familiar names Zumiez, but there are many more like likely at school then I gave you a long list of digital platform, but moving and starting to produce leveraging coordinate.
Eric: So this is something that we see as full brand. If you are looking for major big brands I can tell you we engaged with many of them. They are a few projects more shorter term.
Eric: But with each one of them these pilots.
Eric: In the beginning we are starting small and then the intention is to grow and to scale.
Eric: So if you expect it to happen in one or two quarter I would say it will take longer but we expect that already in H, two and definitely 2026, some of those big brands will leverage it will leverage our customer we leveraged all demand.
Eric: And we leverage commit technology is vertically of wholesalers.
Eric: So that was exactly what I was looking for thank you so much running.
Speaker Change: Thank you. The next question comes from Brian Drab with William Blair. Please proceed.
Brian Drab: Hi, Thanks for taking my questions first just a small question can you clarify what we're talking about when we say the onetime materials recovery effort that added a couple of points of the service margin.
Speaker Change: Yeah.
Speaker Change: Sure. It was just an effort on the part of our service organization to attendance.
Speaker Change: Certain materials that needed to be brought back in and they did so and they finished with that activity. So we thought it was worthwhile to call it out.
Speaker Change: Okay.
Speaker Change: Thank you and then.
Speaker Change: Are you able to give us any sense for how many apollo's have been placed.
Speaker Change: To date in 2025.
Speaker Change: And also I'm curious if you could comment at all on.
Yeah.
Speaker Change: You hit the 30 number for the year of roughly 30, how many new Apollo customers could you add in 2025.
Speaker Change: Yeah. So.
Speaker Change: Lastly, I answered before on their Paulo.
Speaker Change: We are not disclosing exactly the number of proposals that we have right now in the field I did mentioned very clearly that we still expecting to deliver around 36 tenths of a call of this year.
Speaker Change: We have a very strong pipeline, which built mainly on net new customers, but also existing customers buying additional systems.
And I also mentioned in a specific case of one of our customers of those planning to buy multiple systems and decided to delay.
Speaker Change: But this does these things are being reallocated to new customers.
But the benefit and so the good news is that we are becoming much more diverse and that doesn't having few customer with many systems. We have many more customers that are starting to grow with us is one or two systems.
Speaker Change: And I'll just thank you I'll just try to ask Brendan.
Speaker Change: Slightly different way, just because you know that.
Speaker Change: The industry and it in so many industries. This year kind of February March April seem to just pause and I'm just wondering if.
Speaker Change: Do you expect to maybe you don't want to answer this I guess, but do you expect to place more apollo's in the second half of the year. Then you would would have in the first half of the year as it is it is it somewhat.
Speaker Change: Pending on it.
Speaker Change: Stronger second half a pilot placement.
Speaker Change: So for the part of the plan from the beginning was that the second half of <unk> will be stronger than the first half of this.
Speaker Change: Part of the reason is therefore of shipment.
Speaker Change: Many of the customer would like to be ready before the peak season. So we expect a large amount of orders to be shipped.
Speaker Change: Shipped in Q3, and the beginning of Q4.
Speaker Change: Okay, alright, thanks very much.
Speaker Change: Thank you.
Speaker Change: The next question comes from Chris Moore with CJS Securities. Please proceed.
Speaker Change: Hey, Thanks, guys. Thanks for taking a couple yeah, maybe maybe we could start with tariffs it sounds like it's not something that's.
Speaker Change: Keeping you up at night at this point in time is there any difference between.
Speaker Change: You know the way direct sales are are looked.
Speaker Change: Looked at versus the AIC model I mean, my understanding is most of the systems were shipped from Israel spare parts from Europe. The AIC is maybe not technically at Pratt.
Speaker Change: Product sale.
Speaker Change: Any difference in the way that that could be looked at.
Speaker Change: Okay. So first of all thanks for the question. So as you rightfully pointed out I'll give a little bit more background, you know about 60% of our revenues in the Americas. The majority of that goes to the U S and as you mentioned the products. We sell are largely manufactured in Israel and that includes the system.
And a portion of the spare parts.
Speaker Change: And to note that some of those parts are actually manufactured in the U S.
Speaker Change: So for when we sell the product from Israel to our U S subsidiary, they sell it and turn to our end user customers.
Speaker Change: The tariff purposes, what matters is the price at which we sell from Israel to the U S subsidiary the manufactured goods, what they're used for whether it's a strength that our AIC is not pertinent for cash purposes. What is pertinent is the price at which we sell those goods to the U S subsidiary that price is on.
Speaker Change: Cost plus basis, not the revenue price cost plus and of course, the parts that are actually country of origin U S are excluded and that's about 10% to 15% of that cost. So consequently.
Speaker Change: We expect barring any changes from the present state that only a modest impact from the tax will be seen on cost of goods sold.
Speaker Change: Thank you that's very helpful are really helpful.
Speaker Change: And maybe just you know back to the competitive landscape.
Speaker Change: The EIC model you know I think it's just a function of two things yet.
Speaker Change: Great products, especially the Apollo very strong balance sheet.
Speaker Change: Are you hearing any things in terms of competitors looking to try to create a similar EIC model.
Speaker Change: We had rumors about competitors are talking with customers that they potentially can provide them.
Speaker Change: Something similar to AAC.
Speaker Change: We didn't see in fact.
Speaker Change: And when we're looking at the cash position balance sheets or the situation of the company as a therapist, representing we don't think it's a scalable model that they can bring to the market.
Speaker Change: Fair enough I will leave it there I appreciate it guys.
The next question comes from Troy Jensen with Cantor Fitzgerald. Please proceed.
Troy Jensen: Yeah, Congrats on the nice quarter loved enthusiasm here running.
Speaker Change: Maybe quick to start with Laurie here $14 5 million for the AIC.
Speaker Change: I'm, assuming that's not a ratable number it's not going to be a 25% of it we're going to see next quarter, it's going to be maybe more back end loaded or just correct me. If that's wrong and then when did you guys start really effectively selling AIC contracts you know how long did it take to get to this level.
Speaker Change: Okay.
Speaker Change: Thanks for the platform side, so as I mentioned, the <unk> number for AIC that we're reporting is based on more mellow level contractual impression number multiplied by the price per impression and we do that at the point in which the system was shipped to a customer so from the point of shipment left or right. After me to stop they have to get up to production.
Speaker Change: Et cetera, et cetera, et cetera, so it's not an immediate.
Speaker Change: Question as you mentioned, it's spread out over time at least in the first year. After the first year should be fairly steady okay.
Speaker Change: Would it be more fourth quarter loaded, though given that everybody expects the frontline in the fourth quarter.
Speaker Change: I guess, that's one of them just the seasonality of the Oh I see.
Yes.
Speaker Change: Yeah.
Speaker Change: I think well, yes, if our customers are.
Speaker Change: Customized white space for fourth quarter is typically a stronger quarter for them.
Speaker Change: So in that sense, yes, but again its there.
Speaker Change: We're reporting.
Speaker Change: <unk> deal in the third quarter until the customer gets a lot.
Speaker Change: It would take some time right right.
Speaker Change: Alright understood Yep Yep.
Speaker Change: And then just wanted to start effectively selling it how long did it take to grow that put you in a house.
Speaker Change: We announced the AIP program at some point last year.
B in the middle of the year, I think and started marketing at that time.
Speaker Change: Okay.
Speaker Change: And how about a round and just for you I'd love to get an update on the roll to roll market opportunity for him.
Speaker Change: Yeah.
Speaker Change: Can you repeat the question Im not sure I understood Liquidnet roles of all time or the higher end designer market.
Speaker Change: Yeah, Laurie I mean, you talked about that.
Speaker Change: Okay.
Yeah. So we mentioned, but the world is going to be a growth year for this segment and definitely in Q1, we see we saw growth versus the <unk>.
Speaker Change: Q1, we expect for the rest of it.
Speaker Change: It will be stronger than 2024.
Speaker Change: We start to see it.
Nice traction in a few markets segment, one of them I mentioned in the previous calls the footwear market.
Speaker Change: This is continued to grow.
Speaker Change: I can share that yesterday.
Speaker Change: We shake hands with a new customer or for Oxy is the second customers that already has fix them.
Speaker Change: For buying additional systems so.
Speaker Change: We shake hands on this.
Speaker Change: Yesterday, and this going to be delivered this quarter.
Speaker Change: So it's progressing we see the appetite of those customers they see the benefit.
Speaker Change: And this solution is commercial in the market and you can buy footwear.
Speaker Change: Bye.
Speaker Change: Coordinate technology. So this is one market segment.
Speaker Change: We can see also growth in the technical market.
Speaker Change: And with all kinds of unique applications.
Speaker Change: In Asia and also in Europe.
Speaker Change: In the fashion industry, we see that we're getting more into the mainstream.
Speaker Change: Fashion industry with customer in India.
Speaker Change: In Latin America in Colombia, specifically, we have a strong customers with growing very very nicely.
So overall the good progress.
Speaker Change: Of course, and we see nice growth on the impressions.
And the feedback is.
Speaker Change: Is getting stronger.
Speaker Change: We start to see a move in this market is still below what we expect it to be today in terms of the growth in this market.
Speaker Change: But the pipeline is getting stronger.
Speaker Change: Awesome.
Speaker Change: Alright, well, congrats again and good luck going forward.
Speaker Change: The next question comes from Chris Reimer with Barclays. Please proceed.
Speaker Change: Hi.
Chris Reimer: My questions have been answered already but I. Appreciate the time, maybe just one for you Larry where are you guys finding any other opportunities to maybe drive profitability a little more as you wait for the for the revenue side to kick in a little more.
Chris Reimer: Thanks for the question. So we are vigilant.
Looking for efficiencies.
Chris Reimer: And everywhere, we can find and may even highlighted one that impacted Q1.
Chris Reimer: We look at in the way, we operate and the processes and various expenses, we're very very diligent.
Chris Reimer: Diligent and vigilant in this respect.
Chris Reimer: The only thing that I will.
Chris Reimer: The most important yeah.
Chris Reimer: So our profitability is of course impression growth.
Chris Reimer: So we're doing a lot of activities with our customers helping them connecting them.
Chris Reimer: With demand generator.
Chris Reimer: <unk> retailers create tools.
Chris Reimer: The events that we had last months in Miami the connection events was exactly about that bringing in into one room, both retailers and brands.
Chris Reimer: Demand generator connecting them with our customers and this generated of course in the end moving question to coordinate.
Chris Reimer: The question is are all.
Chris Reimer: Or are we carrying or way of growing.
Chris Reimer: New for college, which is very very important.
Chris Reimer: The example of a good thing that we just mentioned.
Chris Reimer: As the new partnership. This is is the outcome of this event and there are many more that will come.
Speaker Change: Got it thanks, that's great color that's it for me.
Speaker Change: The next question comes from Jim Ricchiuti with Needham <unk> Company. Please proceed.
Speaker Change: Hi, Good morning, this is Chris <unk> on for Jim.
Speaker Change: The <unk> partnership it sounds like a really interesting partnership and particularly in light of filling up capacity, how many how many more.
Speaker Change: The opportunities are there out there like like gluten to pursue too.
Speaker Change: To kind of feed the feed.
Speaker Change: See feed the network.
Speaker Change: With these big large partnerships. Thank you.
Speaker Change: Yeah.
Speaker Change: Yes without getting into names many many digital platform out there.
Speaker Change: That all needs to move into on demand.
Speaker Change: You don't want to walk too as a consumer to go to a digital platform to ask for a product and you get an answer that you don't have the size or the color or the design.
Speaker Change: They have to move to on demand.
Speaker Change: And we are forging each and every one of them. We have already many great example, one of our biggest customers is painful the just announced acquisition for you.
Speaker Change: Months back of 25.
Speaker Change: And many more like Oh.
Speaker Change: <unk> and others that are using.
Speaker Change: <unk> is a platform.
Speaker Change: The customer is another Big example of online.
Speaker Change: The digital platform that are leveraging coordinator technologies. Some of them are connected directly to coordinate ex some of them, we connect them directly to our customers.
Speaker Change: And.
Speaker Change: This is really driving growth to our customers and to coordinate and it's beneficial for the market.
Speaker Change: Great Thanks and.
Speaker Change: You had had a healthy operating cash in the quarter and and.
Speaker Change: It looks like you wrapped up the share repurchase plan.
Speaker Change: Curious if you can comment on.
Speaker Change: How you think about capital allocation priorities going forward in 2025, and what potential use of cash are you considering beyond the share repurchase program.
Speaker Change: Okay. Thanks for the question so.
Speaker Change: <unk> approved 100 million share repurchase that we spoke about in September at the Investor event.
Speaker Change: We have about $17 million remaining on that which we expect to use in the near future and at that time, we also laid out our capital allocation framework.
Speaker Change: That framework, we spoke about of course, the $500 million returning capital to our shareholders and while that is a fluid framework and we can't say that it wouldn't change we're not ready at this point to have that discussion yet.
Speaker Change: Also in that framework, we spoke about balancing organic investments like AIC with strategic acquisitions.
Speaker Change: Allocated a fairly sizable amount for the AIC program and a certain balance for acquisitions similar to those at the company has undertaken in the past and we continue to review that and move forward.
Speaker Change: Great. Thank you very much.
Speaker Change: I have a follow up question from Brian Drab with William Blair. Please proceed.
Brian Drab: Hi, Thank you I just found myself feeling like I needed to clarify one one thing so on on the calculation of the air I understand.
Brian Drab: We've clearly seen a couple of times, it's a minimum cost per impression times the.
Brian Drab: Or is the cost per impression times, the minimum contracted number of impressions and.
Brian Drab: If we get to the fourth quarter and.
Brian Drab: Every customer on AIC runs their machine say twice as much as they do on a normal quarter I'm just you know just to.
Brian Drab: Put a rough scenario out there does the E.
Brian Drab: Our our calculation reflect.
Brian Drab: Reflect that or its still always just based on that.
Brian Drab: Minimum.
Brian Drab: Number of contracted and impressions.
Brian Drab: Yeah. So great question, Brian Let me clarify.
Brian Drab: And we always when we flex the minimum commitment of customary signing on in the contract the minimum commitment is the great.
Speaker Change: Click slipped is paying coordinate multiples they'd been minimum commitment of impression that he has to run even if you ramped wise, we will report the error on the minimal where you're going to see the difference once we will start reporting on the AAC as a separate line and this will probably be begin.
Speaker Change: End of next year, because it's going to be a significant.
Speaker Change: Number.
Speaker Change: Then you will start to see the difference between the ore to the actual revenue that's being capture from the AIC program.
Speaker Change: Hope it's good.
Yes, that's right.
Very helpful and that's right on.
So it was the case and that's great. Thanks Rhonda.
Speaker Change: Yes.
Thank you.
Speaker Change: The next question is a follow up from Greg Palm with Craig Hallum. Please proceed.
Greg Palm: Yeah, Thanks, just going back to your comments on the.
Speaker Change: The major Apollo there are customer that had committed and maybe delayed I mean I.
Speaker Change: I just wanted to make sure I'm clear you used the word delayed not canceled and so I guess, maybe a two part question is is there any potential that that any of those units get placed this year is there a potential that they get place next year and is it more of a matter of trying to find the right place to put them I E based on.
Geography.
Speaker Change: So I cannot get into specific are you probably all know who is the customers.
Speaker Change: Okay looking at the reception of happening in the market and asking yourself what is the next step.
Speaker Change: From their perspective, where that should produce a we are working very very closely with Ben I definitely use the word delayed and not canceled its delay.
Speaker Change: We still hope that some of those units will happen. This year, we are not waiting we are reallocating those units to new customers.
Speaker Change: But if the customer will decide to implement the system in which we still hope that this will happen this year.
Speaker Change: We will do our best to support them.
Speaker Change: Okay fair enough all right. Thanks.
Speaker Change: Thank you at this time I would like to turn the floor back over to Mr. Samuel for closing comment.
Samuel: Yes. So thank you all I know it was a long call many news.
Speaker Change: In this call I. Thank.
Speaker Change: You all understand that there was never a better time for me to disrupt the market and to lead this change of moving to onshore mass production.
Speaker Change: In a sustainable way.
Speaker Change: You for joining today's call. We are very excited about the opportunity of going after the mass production with Ctrip August.
Both capturing dosing question and we look forward to continue updating you and to give you transparency as much as we can moving.
Speaker Change: Moving forward looking very forward to meet many of you on a personal level. Thank you very much.
Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yes.