Kornit Digital Ltd. Q4 FY2025 earnings call

• Entered 2025 with clear targets to return to revenue growth, transition to recurring ARR model, achieve positive EBITDA, and generate positive cash flow. Achieved all objectives with Q4 revenues at $58.9 million and adjusted EBITDA at $5.5 million, both at upper end of guidance. Full year 2025 saw return to growth, positive adjusted EBITDA, and strong operating cash flow of ~$24 million. - Transitioned towards more recurring business model with ~$25 million in ARR from AIC program, supported by multiyear customer commitments. - Observed strong shift from screen production to digital, with over 40% of system deals in 2025 from net new customers, including traditional screen printers adopting digital. Examples like a Polish screen printer ordering an Apollo system, U.S. midsized screen printers adopting Atlas MAX platform, and existing customers like Zumiez, 500 Level, and Basic Thinking expanding their fleets. - Encouraging momentum in customized design segment with growth from higher utilization and customer capacity additions. - Expect 2026 to be stronger for roll-to-roll business in footwear and technical/functional apparel segments with new technologies to be introduced later in the year.

For the fourth quarter, total revenue was $58.9 million. AIC revenue grew 104% year-over-year, ending the quarter with $24.8 million in ARR. Impressions, a key leading indicator, saw strong double-digit growth in Q4. For the full year 2025, total revenue was $208.2 million, up 2% year-over-year, driven by expansion of the AIC program. AIC revenue increased to $15.0 million from $3.3 million in the prior year. Impressions grew 11% for the full year, reaching 243 million impressions. Non-GAAP gross margin for Q4 2025 was 50.7% compared to 55.1% in Q4 2024, and for the full year 2025, it was 47.2% compared to 48.6% in 2024.

• For the first quarter of 2026, expect revenue of $45 million to $49 million and adjusted EBITDA margin between negative 10% and negative 4%. - Anticipate low single-digit revenue growth in 2026, driven by deliberate acceleration of transition to AIC model. - Expect stronger profitability expansion and continued positive cash flow from operations, with ARR continuing to grow through additional AIC system deployments.

• Forward-looking statements subject to known and unknown risks and uncertainties. - Impact of foreign exchange rates, as seen in fourth quarter and full year 2025 operating expenses with unfavorable FX impacts. - Tariffs, which affected product mix and gross margins in previous periods.

Q: Greg Palm asked about color on peak season run and performance of Apollo.

A: Ronen Samuel responded that peak season was strong with double-digit impression growth. Major growth came from AIC program, screen market shift, and Apollo systems with over 90% uptime in Q4, 40% of existing Apollo customers ordering second or more machines in 2025, and upcoming demonstrations at Connection event for Apollo.

Q: Brian Drab asked about low single-digit forecast and bridge to 2026 including Amazon upgrade order.

A: Ronen Samuel stated that global strategic customer's upgrade order will have impact but they are prudent in guidance, focusing on AIC ARR revenue to build long-term quality and predictability. Assaf Zipori mentioned AIC has accretive gross margin and they are disciplined with expenses.

Q: Erik Woodring asked about Apollo story, onboarding new customers, and cohort observations.

A: Ronen Samuel explained that sales cycle for Apollo with new screen printers is different, requiring showing value and working on workflow, but they've built lighthouses and seen success with customers telling the story. Assaf Zipori discussed gross margins and expenses related to AIC scaling and disciplined OpEx approach.

Q: Troy Jensen asked about market share and cost question.

A: Ronen Samuel noted market is shifting towards digital due to product life cycle changes and necessity. Assaf Zipori said non-GAAP OpEx is expected to have no significant changes going forward with contained FX exposure.

Q: James Ricchiuti asked about direct-to-fabric market update and price increases.

A: Ronen Samuel said 2026 has stronger pipeline for roll-to-roll, with new technology to be unveiled at Connection event, and price increases implemented and baked into the model. Assaf Zipori confirmed price increases are reflected in guidance.

Q: Christopher Moore asked about ARR progression and geographic mix.

A: Ronen Samuel said ARR is a major milestone with 5-year customer commitments, expecting top line growth when ARR reaches $50 million. Geographically, Americas, especially North America, will continue to lead growth, with EMEA catching up and Asia showing acceleration in footwear and sports markets.

Q: Tavy Rosner asked about footwear market opportunity and solutions.

A: Ronen Samuel explained footwear is a new market for Kornit, with leading sports brands impressed by capabilities, opportunity of 2 billion impressions, and growing pipeline and utilization in the footwear segment.