Kornit Digital Ltd.

Greetings and welcome to the Core Neat Digital Limited first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to our host, Kelsey Turcotte. Thank you. You may begin.

Thank you, Operator. Good afternoon, everyone, and welcome to Cornete Digital's first quarter 2020 earnings conference call. 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 objectives, plans, strategies, Statements of preliminary or projected results of operations or our financial condition and all statements that address activities, events, or developments that the company intends, expects, projects, believes, or anticipates will or may occur in the future. Forward-looking statements are based on assumptions that are subject to known and unknown risks and uncertainties and could turn out to be incorrect, which could cause results to differ materially from those expected or implied by the forward-looking statements. Thank you for joining us. and the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, 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 posted on the company's investor relations site. On the call today, we have Ronen Samuel, Kornit's Chief Executive Officer, and Guy Avedon, Kornit's Chief Financial Officer. At this time, I would now like to turn the call over to Ronen. Ronen?

Thank you, Kelsey. Good evening, and thank you for joining us on this afternoon's earning call. I want to start by extending our thoughts and prayers to everyone who has been impacted by COVID-19 and which all affected a safe and healthy recovery. After weeks of uncertainty, we are enthusiastic to see many countries progressing on their exit plans and business activities picking up. At the start of the pandemic, we acted decisively to ensure the safety and health of our staff while maintaining business continuity. Our manufacturing sites and R&D labs continue to operate in staggered shifts, our service teams continue to work closely with our customers, and our global staff shifted to work from home where needed. On the community front, we actively partnered with manufacturers and large brands for production of protective personal equipment with the use of our inks and our systems. Overall, I'm very proud of how well our team handled this incredibly stressful period. At this point, all our manufacturing and R&D sites are fully staffed again and our Experience Center are open, operating in line with safety guidelines of the local authorities. While Q1 results of total revenue of $26.8 million, including $564,000 of warrants related to global strategic account represent the immediate and short-term impact of the pandemic on our business, we are already witnessing a very strong recovery path back to growth. I want to share with you our view of the industry. What we have seen over the past weeks Our readiness to execute and how we expect the balance of the year to look. This crisis is fundamentally changing behaviors and how the textile industry is looking at both demand and supply. And we believe this is an inflection point in the continued adoptions of digital textile production. In the last few months, e-commerce has gone from a growing channel to the only channel of operation for all age groups and genders. We expect this to have a long and lasting effect on consumers as they continue to embrace the flexibility and efficiency associated with this channel. At the same time, existing supply chains are not adequate to support successful e-commerce business models at scale. The industry needs to adopt agile, digital, sustainable on-demand manufacturer models to succeed on that channel. Traditional retail will certainly return. But the crisis has exposed the massive inefficiency associated with this classic supply and demand offshore operating model in place, resulting in massive inventory write-offs and continued environmental disaster. So it is clear to us that the mega trends that have been fueling our growth are only going to accelerate once the short-term impacts subside. What we have seen over the last few weeks is that customer sites are starting to reopen and strategic accounts with big projects have re-engaged. Some major orders we expected in Q1 have already been received in Q2 with partial implementation in Q2 and the remainder in the second half of the year. Our partners, particularly those in the online customized design segment, as well as brands and retailers with solid e-commerce on-demand models remain very active and we expect that they will continue gearing up for the holiday season. A great example of this is Printful, one of our strategic accounts and a leader in the on-demand printing segment, which has been experiencing very strong demand throughout the pandemic and has recently decided to invest in six additional Atlas systems as part of a larger plan investment bringing the total system globally to more than 55 Cornet systems. Printful is adding significant on-demand capacity to capture business opportunities globally. Recent developments have only served to highlight the importance for brands and retailers of adopting flexible, digitally enabled on-demand production models. To that end, one of our regional accounts in North and Central America, TSC, has recently contracted with well-known Tier 1 retailers, for short-run proximity production addressing the flexible inventory management needs resulting in a strategic investment in six additional new Atlas systems which will replace the screen printing equipment. This order further underscores that what seems at one point visionary is now reality as customers embrace the market shifts to proximity on-demand model. This is also a strong testament to our successful execution of the Go Direct model put in place last year. Earlier this year, we announced the release of the Vulkan Plus. This system is our largest one and is intended for fulfillers with very high volumes of short to mid-run production orders. One of our regional accounts in North America ordered the first system in March and has now placed an order for a second system. Their production team believes they will need to add at least two additional Vulcan Plus systems and four additional Atlas systems before the holiday season starts. As they hear from brands and retailers, their needs for agile production and flexible inventory management which can only be obtained with digital. We are very pleased with this early inception of our Vulcan Plus system. Interesting how Presto continues to be strong, as innovative customers realize the massive opportunities this system can help them monetize. In March, we announced the release of our new NeoPigment Robusto SoftNerd solution for the Presto. This solution is a game changer for our DTF offering as it allows Kornit Presto users to produce on demand for top retailers and fashion brands with no compromise on hand-fill. Spoonflower One of our strategic customers and long-time visionary partner has placed an order for four additional Presto systems since the beginning of the quarter on top of additional four Presto systems that were purchased mid of last year to respond to the increased demand they are experiencing for their innovative on-demand offerings. While we cannot share specific details associated with the business of our global strategic customer, our partnership is as strong as ever and we are investing in the preparation, resources allocation and operation readiness required to deliver on their ambitious growth plans in North America, Europe and Asia. As mentioned above, we are in the midst of re-accelerating growth. Our pipeline is getting stronger, our leadership position has only strengthened, customer engagement is high, and we see strong recovery with our install base. That being said, we feel that it would be irresponsible to provide detailed guidance for the second quarter with macro volatility levels still high. At this point, we expect to do significantly better than consensus revenue estimate with at least 30% sequential growth in Q2 compared to Q1 2020. As for the rest of the year, we expect to deliver high single-digit year-over-year revenue growth in the second half of 2020 with gross margin in a similar range to the second half of 2019 and a positive operating profit for the entire year. Kornit is extremely well positioned with a healthy business model and a strong balance sheet. I am more confident than ever in our value proposition, our leadership position and our excellent people. This short-term dislocation is an inflection point to the entire textile industry which will adopt flexible and sustainable inventory management enabled with on-demand digital production. We believe the market is now accelerating in our direction and we are ready to capture it. Now we will turn the call over to Guy for a closer look to our numbers.