Kornit Digital Ltd. Q1 FY2025 earnings call

Industry Disruption

• The apparel industry is undergoing significant disruption with demand for instant gratification, variety, fast delivery, and sustainability. Kornit's digital platform is well-positioned to lead due to its agility.

Apollo System

• Successful adoption and scale-up of the Apollo system, driving growth in mass production. Attendees at FESPA Berlin were impressed by Apollo's capabilities in terms of labor saving, automation, high-speed throughput, and retail quality. The pipeline for Apollo is expanding with new customers and early adopters adding systems.

AIC Model

• Accelerating adoption of the All-Inclusive Click (AIC) model, a printing as a service approach. ARR from AIC contracts reached $14.5 million, with over 80% of Kornit's total revenue being recurring or highly predictable.

Impression Growth

• Record 222 million impressions driven by stronger system utilization. Partnerships like with MAS ACME and Gooten validate the platform's ability to support on-demand production, with adoption growing across various digital native platforms.

Revenue for the first quarter was $46.5 million, within the guidance range of $45.5 million to $49.5 million. Product revenues grew primarily due to the expansion of the AIC program. Service revenue declined year-over-year as fewer Atlas MAX upgrades were shipped, but was partly offset by more MAX Plus upgrades. Non-GAAP gross margin was 45.2% in Q1 compared to 37.5% in the same period last year. Adjusted EBITDA was negative $3.9 million in Q1, an improvement from the negative $7.8 million in the same period last year. The balance sheet remained robust with a quarter-end cash balance of $513 million. Operating cash flow was $5.8 million. Annual recurring revenue (ARR) from AIC contracts reached $14.5 million. Impressions were 222 million, a 10% increase year-over-year.

Second Quarter

• Expected second quarter revenues to be between $49 million and $55 million. Adjusted EBITDA margin expected to be in the negative 4% to positive 4% range.

Full-Year

• Full-year expected to have revenue growth, adjusted EBITDA profitability, and positive operating cash flow. H2 expected to be stronger than H1 due to momentum from Apollo, AIC, impressions, and demand generation.

• Macro uncertainty including trade policy developments (e.g., proposed U.S. tariffs) and soft consumer sentiment. Potential impact of tariffs on cost of goods sold is expected to be modest but remains a risk.

Q: Broader discussion on market backdrop and Apollo placement A: Market is undergoing significant disruption; Apollo is a game-changer with strong feedback. Expect to deliver ~30 Apollo systems this year, with pipeline filled by net new customers and existing customers adding systems.

Q: ARR from AIC and catalyst playout A: ARR from AIC is $14.5 million, with strong pipeline. Catalysts like de minimis closure are creating urgency but tailwinds will play out over longer term with pilots and scaling.

Q: Competitive landscape and AIC model A: Competitors rumored to try similar models, but not seen as scalable. Kornit's strong balance sheet and products give competitive edge.

Q: Roll-to-roll market opportunity A: Roll-to-roll market showing growth with traction in footwear, technical, and fashion industries. New customers and pipeline expanding.

Q: Capital allocation and AIC revenue recognition A: Remaining $70 million of share repurchase plan. ARR is based on minimum contractual impressions; actual revenue from AIC will differ once reported separately.