Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kornit Digital Ltd (KRNT, Financial) reported revenues of $50.7 million and an adjusted EBITDA margin of 2.9%, both within the guidance ranges set in August.
- The company's gross margin improved significantly, climbing to over 50%, reflecting a more profitable sales mix and higher margin products and services.
- The revamped go-to-market strategy is unlocking significant new market opportunities, particularly in the transition from analog screen production to digital.
- The All-Inclusive Click (AIC) model is driving growth by lowering barriers for high-volume manufacturers transitioning to digital production, providing a predictable cost structure.
- Kornit Digital Ltd (KRNT) is on track to deliver 30 Apollo systems in 2025, with a strong pipeline and confirmed orders for more than half of these systems.
Negative Points
- Year-over-year system sales declined, and service sales were approximately flat, indicating challenges in maintaining growth across all segments.
- The market remains volatile, and the company acknowledges that it is still in a transition phase with its business model, which could impact short-term performance.
- The shift to the AIC model requires significant investment and changes in the company's sales approach, which may take time to fully implement and realize benefits.
- Despite improvements, the company is cautious about the overall market recovery and stabilization, indicating that challenges remain in achieving consistent growth.
- The ongoing geopolitical situation in Israel poses potential risks to manufacturing and supply chain operations, although contingency plans are in place.
Q & A Highlights
Q: Can you provide an overview of the current market momentum, particularly regarding the Apollo system?
A: Ronen Samuel, CEO: The market is shifting towards on-demand production, with brands and retailers seeking speed, flexibility, and sustainability. We see a recovery and stabilization in the market, with increased demand for digital solutions like our Apollo system. This quarter, we achieved positive EBITDA and cash flow, and we are on track for 20% growth in H2 compared to H1.
Q: How does the All-Inclusive Click (AIC) model compare to purchasing the Apollo system outright?
A: Ronen Samuel, CEO: The AIC model is ideal for new customers transitioning from analog to digital, offering predictable costs without capital investment. Existing customers with digital experience may find purchasing outright more cost-effective. We expect 75% of our Direct-to-Garment (DTG) business to be on AIC.
Q: What are your expectations for 2025, considering the ramp-up of Apollo and market stabilization?
A: Ronen Samuel, CEO: While we haven't provided specific guidance for 2025, we anticipate growth and profitability improvements. The market remains volatile, and we are transitioning our business model, which will drive growth and profitability in 2025, with more acceleration expected in 2026.
Q: Can you elaborate on the upgrades for your global strategic accounts and potential future plans?
A: Ronen Samuel, CEO: We have successfully upgraded some of our global strategic accounts to ATLAS MAX. While we don't have commitments for further upgrades next year, we are optimistic about future momentum based on initial positive feedback.
Q: How confident are you in your manufacturing capabilities for the Apollo systems, given the current geopolitical situation?
A: Ronen Samuel, CEO: We are confident in our ability to deliver 30 Apollo systems next year. We have contingency plans in place, including inventory and production capabilities outside of Israel, to ensure uninterrupted supply to our customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
