Kornit Digital Ltd. (NASDAQ:KRNT) Q4 2024 Earnings Call Transcript

Kornit Digital Ltd. (NASDAQ:KRNT) Q4 2024 Earnings Call Transcript February 12, 2025

Kornit Digital Ltd. misses on earnings expectations. Reported EPS is $0.18 EPS, expectations were $0.21.

Operator: Greetings, and welcome to Kornit Digital Fourth Quarter and Full Year 2024 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Mr. Jared Maymon, Investor Relations for Kornit Digital. Mr. Maymon, you may begin.

Jared Maymon: Thank you, operator. Good day, everyone, and welcome to Kornit Digital’s fourth quarter and full year 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, Ronen will recap the full year 2024, provide comments on the fourth quarter, and then discuss our view on 2025. Laurie will then review the fourth quarter and full year numbers and provide our first 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.

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. 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. 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.

At this time, I’d now like to turn the call over to Ronen. Ronen?

Ronen Samuel: Good morning, everyone, and welcome to Kornit’s fourth quarter and full year 2024 earnings call. Before we dive into our results, I want to take a moment to reflect the significant transformation Kornit experienced in 2024. This year was a turning point, one in which we successfully executed our strategy, return to profitability, and position the Company for sustained profitable growth. At the beginning of 2024, we set clear objectives: return to positive EBITDA, generate meaningful cash flow and establish a scalable, disciplined model that fuel long term expansion. Thanks to the dedicated effort of our teams, I’m pleased to report that we are not only delivered on these goals, but also introduce game changing innovation, strengthen our market position and expanded into new strategic adjacencies.

Today, we are pleased to report Q4 2024 revenues of $60.7 million and an adjusted EBITDA margin of 13.8%, both within our guidance ranges, demonstrating the successful implementation of our strategy and an ongoing business momentum. We also reported $26.7 million of operating cash flow in the quarter. These results marked two significant milestones, achieving positive EBITDA for the full year, and generating substantial operating cash flow. Our Q4 performance was fueled by a successful peak season and growing impressions across our key customers. One of the most exciting highlights of Q4 was the Apollo platform performance during the peak season. Having delivered 15 Apollo systems throughout the year, with most becoming fully operational during the critical period, customer feedback has been excellent, reinforcing Apollo’s role as a key enabler of mass-scale digital production.

2024 was not just about financial milestones. It was about laying the foundation for Kornit’s long term success. We introduced industry defining solutions, including Apollo, Atlas MAX Plus, and Vivido Ink roll-to-roll setting new benchmarks for quality, cost efficiency and sustainability. Apollo has redefined mass-scale digital production, delivering unmatched productivity, automation and consistency. The strong market response is evident in our growing pipeline, which is already filling up for 2025 deliveries. Additionally, we have successfully upgraded a significant portion of our installed base, transitioning customers from Atlas to Atlas MAX and are now beginning to upgrade them to Atlas MAX Plus. This upgrade path was reinforced by Printful recent announcement highlighting the growing adoption of our latest technology and its ability to drive efficiency and quality at scale.

Our all-inclusive click model is revolutionizing our customers embrace digital technology, driving strong adoption, accelerating penetration in the screen-printing market and already generating meaningful ARR, which we will start reporting as promised on our Q1 earning call. We have expanded our horizon to new markets, including bulk apparel, footwear and home decor, while deepening our presence in key regions. In bulk apparel, we have delivered Apollo and Atlas MAX systems to major screen printers adopting digital technology for the first time, marking a significant step in the transformation of high-volume apparel manufacturing from analog to digital. In footwear, we delivered our solution to three different customers in Asia, with one already in full production for major global brands.

This customer has seen strong initial adoption and is now scaling up with additional systems planned for deployment in the first half of 2025, reinforcing the growing demand for digital production in the footwear sector. We fundamentally shifted our go-to-market approach, emphasizing customer success, account management and recurring revenue growth. We also strengthened our team with top tier talent across all functions, ensuring we have the right leadership in place to drive sustained execution. In conclusion, we have built a business that is resilient, profitable and pause for long term success. Beyond our innovation, we continue to deliver shareholder value. We have executed $75 million of our previously announced $100 million share repurchase program, which we expect to complete by mid-2025.

As we enter 2025, Kornit is in the strongest position it has ever been. The market is showing signs of improvement, driven by a clear shift among brands, retailers and creators towards on demand manufacturing. This transition is becoming increasingly critical for businesses aiming to respond swiftly to evolving consumer demand, while minimizing excess inventory and waste. Additionally, there is significant shift toward nearshore and onshore production as company seeks enhanced supply chain resilience and faster turnaround times. While these trends are positive, certain macroeconomics uncertainties persist. Recent political developments in the U.S. and potential tariffs on Mexico have raised concerns among some of our customers regarding nearshore manufacturing.

Furthermore, potential inflationary pressures stemming from these policies could impact consumer purchasing power. We continue to monitor this dynamic closely, while supporting our customers in navigating these shifts effectively. As we stated in our last call, 2025 is about execution, translating the strong foundation building 2024 into scalable, profitable growth, strengthening our market leadership and driving the industry forward with our innovative solutions and business models. With our continued focus on innovation, customer success and disciplined financial management, we are confident in our ability to drive significant value for our customers, employees and shareholders. With that, I will now turn the call over to Lauri for a closer look at our financials.

Lauri?

Lauri Hanover: Thank you, Ronen, and good day to everyone. Fourth quarter revenues were $60.7 million within the guidance range we provided in November. This quarter, year-over-year growth of 7% resulted mainly from growth in system sales and revenue recognized under our AIC model. For the full year 2024, revenues were $203.8 million compared with $219.8 million in 2023. The decline resulted from lower systems and services sales and was partly offset by growth in consumables. Moving to margins. Fourth quarter non-GAAP gross margin was 55.1%, up from 48.6% in the same period last year. This year-over-year improvement was primarily driven by higher product revenues from systems and AIC, the absence of a warrant impact this quarter and cost base reductions resulting from the initiatives announced at the beginning of 2024.

For the full year 2024, non-GAAP gross margin rose to 48.6% compared with 38.4% in 2023. The increase was largely attributable to a more favorable sales mix driven by consumable sales, reduced warrant impact and the cost base reductions. Looking at expenses. Total fourth quarter non-GAAP operating expenses were $28 million a decrease of about 7% from $30.1 million in the same period last year. For the full year 2024, non-GAAP operating expenses decreased about 14% to $109.8 million. This reduction in expenses reflects the impact of the restructuring initiatives implemented at the end of 2023 and beginning of 2024. Moving to EBITDA. Our adjusted EBITDA in the fourth quarter was $8.4 million, marking a meaningful improvement over the adjusted EBITDA of $0.2 million in the same period last year and the adjusted EBITDA of $1.5 million last quarter.

Adjusted EBITDA margin for the fourth quarter of 2024 was 13.8% compared with 0.3% in the same period last year. For the full year 2024, adjusted EBITDA was $0.3 million, which was up significantly versus negative $30.9 million in 2023. Improving profitability was a key objective for us as we enter 2024, and we are pleased with this improvement of $31.2 million year-over-year, which resulted in positive adjusted EBITDA for the year. Adjusted EBITDA margin for the full year was 0.2% compared with negative 14% in 2023, with the improvement being driven by reduced OpEx, improvement to sales mix, and the reduced warrant impact. Our cash balance, including bank deposits and marketable securities at quarter end, was approximately $512 million. For the fourth quarter, operating cash flow increased to $26.7 million versus $2.6 million in the same period last year.

And on a full year basis, 2024 operating cash flow was a robust $48.7 million compared with negative $34.7 million in 2023. This positive cash flow was primarily driven by strong collections and improved profitability. Our primary use of cash during 2024 was our share repurchase program. We used $84.1 million of cash on repurchases during 2024, bringing the total gross amount used on repurchases to $121.6 million at an average execution price of $24.40. During the fourth quarter, we entered an accelerated share repurchase program, under which we plan to repurchase approximately $75 million of our ordinary shares. Under the terms of the ASR agreement, we received an initial delivery of approximately 1.8 million shares in exchange for a prepayment of $75 million.

The final number of shares repurchased will be dependent on our average daily VWAP through the end of the contract. We expect this program to close at the June. This $75 million represents a majority of the $100 million program we announced at our investor event in September, and we expect to complete the remaining $25 million through opportunistic repurchasing. As Ronen mentioned, 2025 will be a year of execution for us, meaning it will be a year where we aim to turn our vision, innovative solutions and the business model we laid out at our investor event into measurable results. These measurable results include the annual recurring revenue generated by our AIC model. We will begin to disclose this metric during our first quarter of 2025 earnings.

In the meantime, the investments made in our AIC model can be seen on our balance sheet under equipment on lease net. Turning to first quarter guidance. We currently expect revenues for the first quarter of 2025 to be between $45.5 million and $49.5 million and adjusted EBITDA margin to be in the negative 4% to negative 9% range. That concludes our prepared remarks. 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, we are ready to receive questions.

Q&A Session

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Greg Palm from Craig Hallum Capital Group. Please go ahead.

Greg Palm: Ronen, you talked about kind of 2024 a little bit and 2025 is sort of another year of execution. Maybe tell us what you sort of perceive as kind of your goals for the year and how that relates to top line growth potential?

Ronen Samuel: Yes. Thanks, Greg. First of all, I would like to touch on a bit about 2024 because it was a turning point for Kornit. I hear that we set very clear targets in front of us to move to positive EBITDA and generating substantial cash from operation and we have delivered on that. And this was a transformative year for us. On top of that you can see that in Q4 we moved back to growth. And on top of that, of course, we introduced many new products like the Apollo, the Atlas MAX Plus, the Vivido for the roll-to-roll, RSS and many much more. One of the things that we are very proud of and will contribute to your question about 2025 is a new model, the AIC and the ARR that is generating and we’re coming out of 2024 with meaningful ARR that’s going to contribute for the 2025.

We set a really clear target to penetrate the bulk apparel, the screen market which we did major steps into it and some of the major screen players now using Apollo’s and other solution from Kornit. We entered to new adjacencies like the footwear, which we see acceleration and the home decor and all of those will contribute for 2025. Major change and revamp of our go-to-market focusing on customer success, on account management, recovering revenue — recurring revenue sorry, and really bringing new talents across our team specifically for the go-to-market. In conclusion when you see looking at 2024, we deliver on what we promise. We build a resilience business, profitable business ready for expansion and a profitable growth. Now as I mentioned in my prepared remarks, 2025 will be a year that we will see a profitable growth in every quarter and we will generate — continue to generate positive cash from operation.

To do that, we need to continue focusing on execution. Our team is fully focused on execution and I’m going to touch on few fundamentals that we are going to focus in 2024 to make it happen. So, on top of what we’ve delivered 2024 and 2025, on the Apollo specifically, we set a clear target to deliver 30 systems. This is on top of the 15 systems that we have delivered in 2024 and we are coming to 2025 with a strong pipeline and a good visibility on those 30 systems, which will contribute significantly to our top line and also our bottom line, building — continue building ARR is super, super important. The new AIC model really opening for us new market, new customers, and generating very healthy revenues and ARR which we are going to start reporting from the next earnings call of Q1.

And we are going to put we are putting a lot of focus on that and we have internal targets how do we would like to end the year in terms of ARR versus where we start the year. And there is a significant growth that we are building on. Another area of the focus is continue penetrating the screen market. What we see in this market is a clear move from analog to digital. We see a massive opportunity there. We already penetrated some big accounts there and we have a very healthy pipeline to convert to digital. Another very important and very fundamental KPIs for the year is really about impression growth. First of all, we are going to measure it every quarter. We are looking at it on a daily basis. We have a clear target how do we want to end the year in terms of the impression and those impression coming from existing customers.

We start to see a nice growth on the existing customers and also on the capacity utilization of the systems, but also from net new customers specifically in markets that we never been there like the screen market, the footwear, the home decor and others. Another focus area for 2025 will be the roll-to-roll. While 2024 was relatively soft on the roll-to-roll market, we see much healthier funnel for the roll-to-roll business in 2025 specifically in the area of fashion, footwear and home decor. Overall bottom line, we believe that 2025 will be a year of profitable growth and a massive execution by the team. We feel very good entering to 2025.

Greg Palm: I mean when you — and that was helpful color, so appreciate that. When you put that all together does that give you an ability or a potential to get back to double digit growth or would you rather not commit to a certain number at this point?

Ronen Samuel: Yes, so as you know we are guiding only quarter by quarter. So, I wouldn’t — I don’t want to guide for the year. We have better visibility for 2025. Some of this visibility is coming first of all from the Apollo, a major part of the revenue in 2025 will come from the Apollo, and we have a very good line of sight on where we are going to install it. Another area that improving our visibility is the AIC. We are coming to 2025 with a nice meaningful revenue on AIC and it’s going to grow along the year substantially. Of course, we have the inks and services which is almost a recurring revenue for us. So, we have clear visibility on that. But we also came to Q1 with some CapEx order in hand already. So, we have a good visibility for Q1 and for the rest of the year. As for the cost structure, we did significant cost improvement during 2024 and we feel that we are under control for the cost. Therefore, we have also good visibility to our EBITDA.

Operator: Thank you. The next question comes from the line of Brian Drab from William Blair. Please go ahead.

Brian Drab: The first one is just could you give us a little more color, Ronen, on the roll-to-roll opportunity in 2025? And, you had a lot of momentum at the — and LOIs that show in Italy and then high interest rates weighed on that business. But why was it soft in ’24 and what has changed that makes you more optimistic about ‘25?

Ronen Samuel: Thank you, Brian. So, roll-to-roll, when we’re looking at it there’s a few things that have changed. One of them is that we just about to release the new products, which include the Vivido, which right now is ending the beta testing and getting excellent feedback from our customers. This brings the quality of the roll-to-roll to a very similar quality of the reactive ink in terms of the darkness of the black improvement on the hand field. And we also see that the market is really looking for much more sustainable on demand way of manufacturing and Kornit is by far leading this revolution with our pigment — unique pigment capabilities. On top of that, look, we are coming out of two and half years of very soft market in the fashion market.

Many of our customers really in the last two years, two and half years were working partially. Some sites were closed. Some sites were working only one shift and we see the change. They’re getting more demand from their retailers and brands, and they’re getting to much more production. We see it across the board. Still, there is room to improvement, but we see the change in the market. On top of that we see the growth on impression on existing customer. So, our existing customer, we are monitoring every day the number of impressions that they are printing on our roll-to-roll, and we see a very nice growth, and we expect some of them to acquire additional system this year. As I mentioned on my prepared remarks, on the footwear specifically, we managed to penetrate already three major players in Asia.

One of them is already in managed to scale the business and now is producing for large brands and already placed an order for additional systems that we are going to deliver in H1, which we have a full commitment and visibility for that. On top of that we penetrated the home decor in 2024, specifically in H2 ’24, we put a lot of effort to go after the home decor. Beginning of this year, we had an important event in Frankfurt called Heimtextil Steel, and we got really nice feedback from some of the biggest retailers and brands and manufacturers. And our solution has a perfect fit for home decor because of the pigment, the resistance and durability of the pigment. Now that home decor is going much more into unique and short runs, and on demand, we find it as a big opportunity for us.

Also in the fashion, in the fashion we managed to penetrate few big players who is moving from analog to digital or from reactive to pigment and some of them are scaling up and we’ll need more capacity. Overall, our funnel entering to 2025 is much stronger on the roll-to-roll and the team is optimistic that we will be able to deliver much better results in 2025 versus 2024 on the roll-to-roll.

Brian Drab: Okay. Thank you for that comprehensive answer. I’ll just ask one more for now, I think. But the Apollo is obviously still critical to the story going forward, and it sounds like it’s performing very well in the field from talking to you and from talking to customers. Can you just elaborate on what you saw in terms of its performance during the holiday season? what customers were able to produce maybe per hour or what the feedback was from customers and using the Apollo and the quality throughout the holiday season?

Ronen Samuel: Yes. So, Apollo as I mentioned in previous call is a game changer. It’s a game changer for our existing customer, but it’s a game changer for us and for new markets that we are entering specifically the screen and the move from analog to digital. When we are looking at our customers that are using today the Apollo, there is a mix of type of customer. There is the existing customers that are using the Apollo, some of them for very short run-in one of, but also using the Apollo to convert volume that today they are printing on analog, on screen and moving it to digital. On top of that, we have new type of customer, totally new to digital for the first time entering to digital leveraging the Apollo and really moving only mid runs and long run jobs from analog to digital.

Some of them are retailers, but some of them are fulfillers. So, this is very encouraging to see the mix and really opening new markets and incremental impression. This year as I mentioned, we managed to deliver 15 system. Many of those systems were installed just before the peak season, but all of them performed during the peak season. Happy to share with all of you that the performance of the system exceeded our expectation. This of course is very complex new product introduction and new platform and like any new platform there are issues, but this was the best introduction of a new platform that Kornit has delivered ever to a very complex solution in terms of the automation and the capability and the productivity. The satisfaction level of our customers out of it is very high.

And how do you measure satisfaction? I can tell you without any exception that each one of those customers that will already deliver a system or already have the second system or more or about to order the second system or more this year. So, we are very, very pleased with how it’s going till now. In terms of the utilization and capacity, we have reached our goal and customer have reached that goal, while we are planning to improve the capacity and the availability of the systems along the 2025. We’re entering 2025 with a very healthy pipeline and good visibility to deliver on the 30 system during 2025.

Brian Drab: Okay. And before Ronen you said 15 orders were in hand, is that still around that same level?

Ronen Samuel: I mentioned that we have 15 commitment from our customers. Today, we have even more commitment in terms of order. I didn’t mention how many orders we have in hand. We have a very good visibility and line of sight to deliver service system during 2025.

Operator: Thank you. The next question comes from the line of James Ricchiuti from Needham & Company. Please go ahead.

James Ricchiuti: I was wondering, Ronen, if you can give any update on equipment purchases or upgrades from your large global strategic account? I don’t recall you talking about that in the call or I may have missed it.

Ronen Samuel: So, thanks, James. First of all, I would relay — first of all to one of our key strategic customers, which we have announced of major upgrades which is the Printful. They have announced it. During 2024, they upgraded the entire fleet of Atlas’, 86 to be accurate of Atlas’ into Atlas MAX and now we are in a process to upgrade all the fleet also to Atlas MAX Plus and they were sharing the satisfaction about the quality, the productivity and the additional capability in terms of application that they can run. So, we are very, very satisfied about that. As for our global strategic customer, our relationship are very, very close. We are working very closely together. Like many of our key customer they had a very strong peak season, and overall, very healthy year for them like many of other customers, key customer of us.

And as I mentioned in the past, we are hopeful that this year they will continue with the plan to upgrade some of their fleets into Atlas MAX. And we reported that in Q4 there were some upgrades and we hope that we will see this year additional upgrades coming from this customer.

James Ricchiuti: Got it. Laurie, can you help us at all in terms of how we should be thinking about gross margins in Q1 just given seasonality and the ongoing development of the AIC model?

Lauri Hanover: Hi, thanks for the question. In Q1, as you rightly pointed out, it’s the seasonally low quarter, which has an impact on gross margins. As you know, we have adjusted our cost base, and we are looking always to improve efficiency. So, depending upon the mix that we’ll see in that quarter, we would expect the gross margins to be similar to what we’ve seen in the past that being the lowest gross margin that we have during the year.

James Ricchiuti: And if I could, one quick one. Ronen, you mentioned the issue around the geopolitical situation in tariffs, and I think you talked about Mexico. Are you seeing actually seeing any or hearing any changes in terms of uncertainty as it relates to customer behavior given this? Or is, I’m just curious what has changed, if anything, in terms of customer behavior around the issue of tariffs?

Ronen Samuel: So, we were talking a lot about the nearshore and we see the move to nearshore and some of our key customer moved to the nearshore. So, we took the opportunity of course to touch base with each one of them and ask them what are they going to do when there will be a tariff if it will happen? The answer is mainly what we hear from them is wait and see. None of them really has a clear understanding if it will happen, when it will happen and what will be the actions that they are going to take. Some of them looking potentially to move some of the operation into onshore, into the U.S., which can have positive implication to Kornit, but there is a lot of uncertainty. So, we don’t know. We are working very closely with our customer and they don’t know. They are looking into what will be the verdict in the end. And once we will know more, we will be able to report to you.

Operator: Thank you. The next question comes from the line of Troy Jensen from Cantor Fitzgerald. Please go ahead.

Troy Jensen: Hey, thank you. Congrats on the nice results here. Maybe just a couple of questions for Laurie and kind of following-up on Jim’s question on gross margins. I think you said it could be as low as the lowest quarter in last year. So, are you implying gross margins could be as low as 37.5% per —

Lauri Hanover: No, no. Hi, Troy. Now, let me clarify. What I said is that the first quarter is typically the lowest gross margin quarter of the year, which is something that we’ve seen in the past as well. I was not comparing to the prior year.

Troy Jensen: Okay. So, we should well above because last year was kind of a big downtick for you guys in Q1.

Lauri Hanover: Absolutely.

Troy Jensen: I’m not sure you weren’t implying that. But then also just on guidance, I mean, I know you only get EBITDA, but we’ve got a model of EPS and we need a financial income number. And that’s kind of changed a lot for you guys in the past quarter over quarter here. So, could you give us any color on what you think financial income is in Q1 and maybe for 2025?

Lauri Hanover: Troy, we provide guidance in terms of revenue and adjusted EBITDA. We don’t provide guidance on other elements of the P&L.

Troy Jensen: All right. Well, I’ll take it offline, but I guess it’s probably just interest income come down and rates have come down, so I drove it down sequentially a bit. Happy to follow up. So, all right, well, congrats and good luck.

Operator: Thank you. The next question comes from the line of [Maiah Woodring] from Morgan Stanley. Please go ahead.

Unidentified Analyst: Hi, this is [Maiah] on the line for Erik. Great end to the year guys. Thank you for having us. I think maybe just to kind of double hit on gross margins. It looks like total company gross margins hit what looks like an all-time record high in the quarter and product gross margins were quite strong. Can you maybe speak to some of the puts and takes driving that margin outperformance? How would you — how much would you say as a result of the AIC model? And were there any onetime dynamics to call out? And kind of how sustainable is kind of this step up in margins, obviously realizing the seasonality impact as we look into 1Q, but how sustainable would you say are these higher levels of margins looking forward?

Lauri Hanover: Hi, [Maiah]. Thanks for the question. So first of all, as you rightly pointed out, our gross margin is very much affected by the seasonality and the mix within revenues. That being said, some of the key drivers are of course, the volume, the volume of systems, the proportion of consumables in the mix. But we’ve also taken made great strides in terms of our cost base reduction, which gives us additional leverage in terms of our gross margin. And then we have the on boarding of the AIC model, which over time as it becomes a more meaningful element of revenue will also help support improved gross margins.

Ronen Samuel: The only point that I will mention back in the investor event, what we have said that in 2025, you should see a moderate improvement in gross margin, okay, versus this year. So, we are planning to expand it along the year.

Unidentified Analyst: Got it. Very helpful. And then maybe just one last one from me. You talk about good line of sight into the 30 Apollos this year. Is that still the cap in terms of capacity or could you potentially up that if demand far exceeds that 30 for this year?

Ronen Samuel: We have defined the 30 not because of capacity and definitely not because of the demand. The market is much bigger than those 30 systems. We are doing it only because we would like to make sure that every installation of the Apollo is successful. We are still learning a lot. We are working with our customer on each one of the installations, some of it with totally new type of customer. So, we are taking it step by step doubling the number of systems from 2024, 2026 will be the year that we will scale the Apollo to the next level.

Operator: Thank you. The next question comes from the line of Chris Moore from CJS Securities. Please go ahead.

Chris Moore: Hey, good day. Thanks for taking a couple. Yes, maybe just one more on the 30 Apollos for 2025. Just trying to get a sense, obviously, it’s still a work in process, but how many customers do you think are going to comprise that? Is it 20 customers? Is it 10? Are there a few that are taking quite a few? Just kind of any thoughts there.

Ronen Samuel: I prefer not to throw a specific number right now, although we have a very clear line of sight on that. However, what I would say is that the two main audience that will receive those Apollo in 2025. One audience is existing customers that are already using the Apollo. As I mentioned each one of them are planning to add at least additional one system in 2025. There are few of them that will add more than one system. And the other audience is more net new customers that usually are buying one system and we expect them to have only one system in ‘2025. Those are type of customers are coming from the screen, from the analog world and stepping into digital for the first time and they will expand into 2026. So, it’s kind of a mix and I would say is about in terms of number of customers about 50-50 between existing customer to new customers that coming from the analog world.

Chris Moore: Got it. That’s helpful. Obviously, AIC game changer for Apollo. How important is AIC for Atlas MAX or MAX Plus at this stage?

Ronen Samuel: Well, it’s we see encouraging feedback and use of the AIC specifically on the Atlas MAX and the Atlas MAX poly. We implemented meaningful amount of them during 2024. We have a healthy funnel in Q1 and for the rest of the year also for the Atlas family in terms of the AIC. What we see, some of them is going also to net new screen printers, but it doesn’t have the volume to justify Apollo. So, as you know there are really thousands of thousands of screen printers, some of them small, midsize. They cannot commit to the minimum volumes that Apollo can deliver, but they definitely can commit to the minimum volume on Atlas MAXs. Many of them are taking multiple Atlas MAXs. Some of them are taking two or three Atlas MAXs. We already implemented as I mentioned in 2024 and we have a good funnel for 2025.

Chris Moore: Got it. That’s what I was after. I was trying to figure out if there were some, if you’re getting new customers as well because of the AIC model there. So awesome. I will leave it there. I appreciate it.

Operator: Thank you. The next question comes from the line of Tavy Rosner from Barclays. Please go ahead.

Tavy Rosner: Hi, Ronen and Laurie. Thanks for taking my questions. Really quick ones for me, most of them have been addressed. Looking at the demand side, so you spoke about the AIC and the pipeline. When you look ahead like 2025, any prospect of selling new systems not under the AIC? Is there still such a thing given the current macro environment or most of the demand now is through the AIC?

Ronen Samuel: So, as we shared on the Investor Day, it’s very consistent with what we see today in the market both in 2024, but moving forward in 2025. First of all, AIC model is only on the DTG side of the business. All the roll-to-roll business is on CapEx. There is no AIC at this stage for the roll-to-roll business. As for the DTG, when we look at the mix between CapEx to AIC, it’s about 25% of the deals going on are on CapEx, 75% of the deals are on AIC. So, for example, in 2024, while we deliver 15 Apollos, 10 of them were on AIC and 5 of them were on CapEx. What we see today is that if we’ll need to ask ourselves who is choosing AIC and who is choosing CapEx, many of the new to digital customer that were in the analog world and moving to digital prefer to move to AIC to have a predictable cost and because they’re operating the first time digital for them to know exactly how much it will cost them is very, very important and we see a clear growth in this area.

Also, many of them they have a good business, but in terms of cash or capital there are more difficulties. So, therefore, they are choosing the AIC. On the other hand, existing customers that using our systems already and know exactly the cost, they can compare the running cost that they have today on CapEx versus the running cost on the AIC. And many of them are choosing the CapEx because they see it as more favorable in terms of the cost versus the AIC.

Operator: Thank you. Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Ronen Samuel for his closing comments.

Ronen Samuel: Yes. So, thanks everyone for joining us on today call. We are excited about what lies ahead for 2025 for Kornit, and we’re looking forward to updating you on our progress on our next earning call. Thank you very much.

Operator: Thank you. The conference of Kornit Digital has now concluded. Thank you for your participation. You may now disconnect your lines.