Ronen Samuel: Yes. So first of all, as I mentioned on my script, MAX Technology and MAX Quality is the new standard of the industry. We are hearing it from the market, from our competitors, but we’re also hearing it from our customers that are upgrading to the MAX Technology. They are super pleased about the quality and also the productivity of the MAX. I would say, in 2023, we had a very strong year on the MAX upgrade. We are starting this year with few major orders that we already received from customers to uprade their fleet into the MAX. So you will see in H1, a nice uptick or a nice revenue coming from those upgrades as well. I would say, in terms of number of customers, the majority of our customers already did the upgrades and we only have few customers.
Some of them or one of them is very big, that is in the process of deciding if they are going to upgrade, yes or not. And hopefully, this year, there will be some upgrades also within these customers. I would say also that during this year in 2024, we are taking the MAX Technology and the Atlas MAX to the next level. We are going to introduce the Atlas MAX plus. We’ve shown it at ITMA at FESPA in March in Amsterdam. We are going to show the Atlas MAX plus with additional capabilities. These additional capabilities will open for our customers new markets, new applications and new capabilities, and it will be substantial. And it is going to create a major buzz. I’m not going to get specifically now what are the application, what are the capabilities, we are keeping it to FESPA.
I can say, open your eyes and look for FESPA because there will be big news there.
Operator: Our next question is from Erik Woodring with Morgan Stanley.
Unidentified Analyst: This is Maya on for Eric. Maybe just to start kind of as you speak to customers, what is the catalyst that they’re looking for that would unlock that spend? I understand the recurring revenue model helps with that, but just in general, unlocking that spend? I’m just trying to understand what changes are going on in the spending dynamic because you’re launching new compelling products, you’re seeing growth in impressions and consumables demand. So what unlocks that next step?
Ronen Samuel: Thank you, Maya. It’s excellent question. Look, we have, by far, the best technology, the best products portfolio in the market. And as you mentioned, there are other elements that we need to go over in order to accelerate the growth of our system sales. And it’s different from market to market. Let me start with the market with the direct-to-fabric market, okay, the fashion market. And certainly different dynamics from the direct-to-garment. In the fashion market, when we are talking today to customers and in the last few months, I traveled all over the world to visit those customers, both in India, in Latin America, in Eastern Europe to visit our key customers and key prospects. And they are all telling me the same story.
They’re all telling me that they have to change the technology from reactive and acid inks to technologies enable them flexibility to create on different material, different fabrics without changing the ink or the technology that enables them just-in-time production and sustainable without consuming water, without pollution. They’ve been forced to do that by the brands, and they see the legislation, regulations coming over and capturing them. They have to change to pigment. Pigment is the only solution and Kornit is by far the best pigment in the market, the best solution in the market not only in terms of the pigment but in terms of the capability of being able to print on dark fabric with whiting, with XDI, we are the only player in the market doing it.
All the big players, all the big fulfillers that I was talking are super interested in our technology. Some of them already adopted it, like the one customer that I visited or one of the customers I visited in India, which is a massive, it’s like a city and massive potential of acquisition of many systems and just starting now with one of our systems, on Presto MAX. So the market has to move there. What they are telling us that currently their customers, the brands and retailers still struggling to get rid of the inventory that pile up from the Corona time. And they all believe in talking with those brands during 2024, it will be behind them, and they will go back into full production. We believe that this will open the gate. This will open the gate for our technology, for moving to pigment now that we are also bringing the Visitor with a better hand fill and better black.
This will accelerate the growth in the market. As I mentioned, I believe this market is a major growth engine moving forward to Kornit. So this is on — the direct-to-fabric is really about brands and retail moving back to production. On the direct-to-garment. Again, let’s break it to two different markets. One is the traditional market that Kornit was working on is customized design. And what we can see on our key customers and customized design, we have hundreds of them, and we see the same phenomena. Finally, we start to see that they are back and increasing the utilization versus 2021. So many of them, not only printing more than they were printing in 2021 in the peak, but actually utilizing better the systems and we believe that some of them will get into the cycle of adding capacity in 2024 and definitely after the peak season of 2024 into 2025.
So this is customized design a very good indication. On the bulk apparel. The bulk apparel is replacing screen. And there, we are going very strong with the Apollo. What is limiting us in 2024 in the Apollo is not the demand in the market. Actually, most of the systems that we are planning to shift and to recognize in 2024, we are already in a very advanced stage of contracts with customers, and the list is almost full for 2024, and now we are working on 2025. As for the MAX Technology, I believe that event like FESPA in March that we have and another event in May that we have as well in Europe will be catalysts to generate more sales into those customers. Some of them are still struggling in terms of cash flow, in terms of financing there, we need to be a bit more creative this model of recurring revenue or moving OpEx, from CapEx to OpEx will help some of them to jump and move ahead into digital or increase the fleet of digital that they’re using.
Unidentified Analyst: Great. And then kind of related to that, you mentioned further diversifying your customer base. Where and what products are you seeing kind of the most net new interest? And in your customer conversations, what’s driving those competitive wins?
Ronen Samuel: Yes. So if we talk about diversification, let’s understand that Kornit was based in the last years mainly on one segment, which is customized design, is one-off customization. Most of our business was in the North America, and most of our business was based on a few big customers that together with us grew this segment of customized design that was not exist before that. Now, the first step that we did in diversification is getting into new market segments, like the bulk apparel, like the athleisure that is growing very nicely for us with the Poly technology, like the fashion, the home decor. We are getting into footwear. We’re getting to technical. So all of those are incremental and diversifying our type of customers.
So you can imagine that when we are going to these type of segments like footwear or technical, those are totally new type of customers that we didn’t have before. Some of them are major, major one. And I will repeat again, the customers that have visited in India is a massive potential for growth for direct-to-fabric. So I see a really big potential of growth in the future for Kornit in the direct-to-fabric, both expanding geography to places like India, Turkey, Morocco, but Latin America is very strong as well, but we see production moving also nearshore and onshore to Mexico and even to North America and, of course, the EMEA. So this is one part. Another part that we put a lot of focus in the last, I would say, two years, is really growing the business with retailers and brands.
Major part of our business today is already coming with those retailers. Some of them midsized retailers in the U.S. that having 500, 600 shops all around the U.S. and changing the business model from outsourcing production to screen printing, moving production in-house into the warehouse in order to do just-in-time production be relevant and shipping and replenishment directly to the shelf of their brick-and-mortars. So we see it very clearly, and we have a long list of customers that are already using our technology. Some of them already scaled up, and we have one of them that already have the Apollo. So this is totally new — another new type of diversification that we didn’t have before, and it’s growing, and we are putting more focus. We actually, with the new operating model, we are building a team that is just going after the retailers and the brands and the demand generation.
We are getting into a pilot, a new pilot with a big digital platform, leveraging KornitX and leveraging our installed base. Those, of course, never been our customer before with a huge potential as well. So these tons of diversification, new customer, new geographies, new products, new segments and I’m very pleased that we managed to do it in the last two years, and I really hope that soon we will see the result in the growth of system sales as well.
Operator: Our next question is from the line of Tavy Rosner with Barclays.
Tavy Rosner: Most of them have been asked. I just wanted to ask about the cash. You mentioned about 550 million net cash. I’m wondering, are you looking into M&A? Are you looking to potentially buying back more shares? How should we think of the balance going forward?
Ronen Samuel: I’ll start, and maybe Lauri will add on top of that. As we mentioned, we continue with the buyback of the shares. We got approval from the authorities in Israel to continue. We have about $90 million that we are planning to execute during Q1. And as we mentioned before, we’re always looking for opportunities of organic and inorganic activities to leverage our cash position. An example of organic leverage of the cash position is this move from CapEx to OpEx model. We will see the impact, and we believe that there will be a great justification to use our balance sheet for this direction. And of course, we are looking for inorganic in specific areas of growth in the companies. Once we will have something to report, we will share it with you. Any additional question, Tavy?
