Kornit Digital Ltd.

Fourth 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 the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now turn the conference over to your host, Elise Ferlani, with the Blue Shirt Group. Thank you. You may begin.

Thank you, Operator. Good afternoon and welcome to Corning Digital's fourth quarter and full year 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 subject to known and unknown risks and uncertainties and are based potentially on inaccurate assumptions that could cause results to differ materially from those expected or implied by the forward-looking statements. The company's actual results could differ materially from those anticipated for many reasons, and I encourage you to review the company's filings with the Securities and Exchange Commission, including the company's Quarterly report on form 6K filed November 10th, 2020, which identifies specific risk factors that may cause actual results or events to differ materially. Any forward-looking statements are made as of this call hereof, 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 website. I will now turn the call over to Ronan Samuel, Cornete's chief executive officer, and Alon Rosner, Cornete's chief financial officer. At this time, I would now like to turn the call over to Ronan. Ronan.

Thank you, Alice. Thank you all for joining us this evening on our earning call. I'm pleased to report an outstanding fourth quarter, significantly exceeding guidance for top-line growth and profitability, capping off a record second half 2020 for Cornete. This proved to be a transformative year in Cornete's history. While 2020 will be remembered for the global pandemic, It is also the year in which the textile industry hit an inflection point. The massive leap in e-commerce and the exposed inefficiency of the traditional textile supply chain create strong trailwinds to the digital transformation that Cornit is leading. In 2018, we laid out our management goal to become a 500 million revenue run rate business at the end of 2023. Upon completion of the second year in this journey, we are more confident than ever in our ability to achieve this goal ahead of plan. Turning to our Q4 results, we finished 2020 on a very strong note, with total revenue going 49% year over year to $72.3 million, net of $1.8 million in warrants related to global strategic account. We delivered record gross margins and we significantly exceeded our operating profitability goal for the full year while generating a record of 34.3 million net cash from operating activities. While traditional retail is recovering from the effect of the pandemic, Ecom and online marketplaces continue to boom across verticals, including core fashion brands, at leisure, merch, sport licensing, customers apparel, and home decor. As a result, key and regional accounts are adding multiple atlases, vulcans, and AVHDs to their existing fleets. And we see multiple customers that started with entry-level systems from Kornit only 12 to 18 months ago moving rapidly to purchase high-throughput systems. We also see a very healthy mix in our order book of net new versus existing accounts across our geographies. The press store is an absolutely game changer for the fashion industry and the level of engagement with manufacturers for top fashion brands continue to grow. The recurring consumable business from DTF is gaining volume and we experience tremendous year-over-year growth in the fourth quarter. On a regional basis, Americas continue to set new record highs EMEA deliver a good quarter, particularly in UK and Germany, with continued movement to the adoption of higher throughput system. While Asia-Pacific continues to struggle with pandemic challenges, our new leadership is making strategic alignments required to capitalize on the massive opportunity and we expect to see a strong recovery in 2021. We enable our customers to have an incredibly successful peak season reflected in the staggering year-over-year growth of our recurring consumable business. Services continue to outperform our expectation on growth and profitability, and I am very proud with the execution of our customer success teams. In Q4, we announced our new business line, leveraging the strategic foundation of Custom Gateway. Our cloud-based software workflow platform is unique, and we are experiencing huge interest from brands and fulfillers looking to adopt on-demand business models at a global scale, as well as automate and optimize the production flows. We received multiple orders from customers across regions and the pipeline continued to grow. We believe there is a huge opportunity for Kornit to build an incremental recurring business model and we have an exciting roadmap of new software applications and value-added services. 2020 was a phenomenal execution year for Kony throughout an unprecedented pandemic environment, demonstrating the accelerating demand for our products and the continued execution of our team. Turning to 2021, our outlook for the year is very strong, supported by the highest level of visibility and confidence in our history. We started the year stronger than ever with accelerating industry tailwinds, an impressive backlog of global expansion projects with strategic accounts that we are in the process of fulfilling, and an extremely robust pipeline. 2021 will be an exciting year filled with significant strategic initiatives. We will launch powerful new products which will drive further penetration into the heart of the fashion, apparel, and home decor industry. We are going to launch a breakthrough propriety automation technology that substantially increases throughput, usability, and consistency of operation. We will be introducing a groundbreaking proprietary 3D textile application that will bring to the market unique embroidery, high-density printing, and vinyl heat transfer effects. This first-of-a-kind application will enable entirely new products creation, disrupt the traditional embroidery market, and significantly expand Kornit's addressable market. We will scale our new software workflow business line. We will execute on massive global expansion with our strategic accounts. And we will expand our footprint in key segments, grow our activities with mega brands, as well as penetrate new market vertical while continuing to drive customer success. I will also note that ESG has been a strategic focus area for Kornit since beginning, especially as it comes to driving sustainability in the textile industry. 2021 will mark the year in which we are taking our long-term ESG program to the next level. Our dedicated ESG team is working with the best professionals in the industry to prioritize the execution of our many initiatives and our first impact report will be published in the second half of the year. Last week we announced Kornit Fashion Week Tel Aviv. An excitement around this event is building rapidly. The widely recognized international event will showcase how innovation and technology meet the fashion world to create a future that is more expressive and sustainable, solving the industry's most pressing problem. More than 40 leading fashion designers will be participating in this international showcase of sustainable fashion and it will give observers insight into the many ways technology empowers even the most demanding designers to deliver fashion that is sustainable without compromising the world famous quality. We couldn't be prouder to be part of this, and it demonstrates our commitment to expand our footprint in the fashion industry. Last year, we were hoping to host all of you in Israel for our business unusual event planned with hundreds of customer partners and investors at this first-of-a-kind event. While global travel restrictions remain challenging to predict currently, we remain optimistic and aim to hold this extraordinary industry event during the second half of 2021. So stay tuned. In a moment, I will turn the call over to Alon Rosner for his first earning call as the CFO of Cornit. Alon brings more than 20 years of financial management experience to the world, and his exceptional leadership capabilities will be essential as we continue to execute on our profitable growth strategy. Cornit is stronger than ever been, and we enter 2021 more confident than ever in our ability to execute on the massive opportunities ahead of us. Moreover, we believe Cornit's initiatives will further disrupt the industry, enabling our customer to achieve even greater success while fueling Kornit's growth and profitability well beyond 2021. Now I will pass over the call to Alon.

Thank you, Ronen, and good evening, everyone. Since joining Cornit in December, I have had the opportunity to immerse myself in the business and operations, as well as get closely familiar with my colleagues and professional teams across Cornit. I am excited with the journey ahead of us as we continue to transform the textile industry and scale profitability. Before beginning the financial overview, I would like to remind you that the following discussion will include GAAP financial measures as well as non-GAAP pro forma results. A full reconciliation of our results on a gap-to-non-gap basis is available in the earnings press release issued earlier today and on the investor section of our website. Now, let's dive into the financials. We are very pleased with our strong fourth quarter results, which significantly exceeded our expectations on top and bottom lines. Fourth quarter results were record high for Cornete across key financial parameters, including revenue, profitability, and cash flow from operations. Fourth quarter revenue increased 49% year-over-year to $72.3 million, net of $1.8 million non-cash warrants impact, and an increase of 26% compared to the previous quarter. Our fourth quarter results were driven by strong demand for our industrial and mass production systems, mostly in North America and Europe, and very high growth in consumables during the peak season. Services revenue for the fourth quarter was $10.9 million, net of $280,000 non-cash warrants impact, accounting for 15% of total revenue an increase of 70% year over year, and an increase of 35% compared to the previous quarter. As a reminder, custom gateway revenue and cost of goods are mostly included in services. We continue to improve our service contracts at that rate, which is growing our recurring revenue stream. As Ronen mentioned, it was a strong quarter in the Americas with 75% of total revenue coming from that region, 20% from EMEA and 5% from Asia Pacific region. In the fourth quarter, we had only one customer that contributed more than 10% of total revenue. Our top 10 customers accounted for 62.1% of total revenue. Moving to profitability. Non-GAAP gross margin in the quarter, net of warrants impact reached 51.8% an improvement of 160 basis points year over year, and 370 basis points from previous quarter. Our gap basis gross margin in the quarter was 51.1%, an improvement of 170 basis points year over year, and an improvement of 400 basis points from the previous quarter. Our strong gross margin is a result of the demand of our for our high-end systems, high demand for ink, profitable service revenue, and continuous operational efficiency. Moving to our OPEX items, I will discuss these items on a non-GAAP basis. We continue to invest in the business to support the accelerated growth opportunities ahead of us. During the fourth quarter, we didn't have any adjustments or expenses related to COVID-19, and we do not expect any costs going forward. Adjusted research and development expenses were 8.7 million or 12.1% of revenue compared to 5.7 million or 11.6% of revenue in the fourth quarter of 2019. The increase in R&D is a result of the accelerated investment in R&D for new products and innovative applications and attributed to headcount additions and use of materials. Sales and marketing expenses in the quarter were 10.2 million or 14.2% of revenue compared to 8.5 million or 17.4% of revenue in the fourth quarter of 2019. We continue to invest in expanding our go-to-market capabilities and in customer-facing activities. However, travel and events expenses were lower this quarter due to continued travel limitations in some areas. General and administrative expenses in the fourth quarter were $6.7 million or 9.2% of revenue, compared to $4.5 million or 9.2% of revenue in the fourth quarter of 2019. The increase in G&A costs is mainly related to additional headcount, professional services, and increase in D&O insurance costs. We ended the quarter with 672 employees, a year-over-year increase of 125 employees and an increase of 15 employees compared to the previous quarter. The year-over-year increase was in line with our growth plans, both organically and inorganically, with 53 new employees joining us from Custom Gateway. Looking forward to 2021, we will continue to invest in growing the organization to support our business, mainly in R&D and sales and marketing. Non-GAAP net profit for the fourth quarter was $11.5 million or $0.24 per share on a fully diluted basis, up from $7.1 million or $0.17 per share in the fourth quarter of 2019. fourth quarter gap net profit was 5.9 million or 12 cents per share on a fully diluted basis up from net income of 4.8 million or 11 cents per share for the fourth quarter of 2019. Adjusted EBITDA for the fourth quarter of 2020 was 14.8 million compared to adjusted EBITDA of 7.8 million for the fourth quarter of 2019. Net cash provided by operating activities was $34.3 million this quarter compared to $14.9 million in the fourth quarter of 2019. The increase was mainly due to the increased level of activity and advanced payments from customers. We entered 2021 with a strong backlog, including $27 million of deferred revenue and customer advances. we expect the deferred revenue balance to convert to revenue in 2021 largely in the second and third quarter. Cash balance, including bank deposits and marketable securities, at quarter end were $436 million compared to $264 million as of December 31, 2019. The increase in cash was mostly driven by the successful offering of $163 million in September and our operating profits. I will now briefly recap our full-year 2020 results. Our full-year results were impacted by COVID uncertainty in the first quarter, then we experienced strong growth in the business in the second half of 2020, which resulted in a record close to the year. Full-year revenue, net of 5.4 million non-cash warrants impact, was 193.3 million, an increase of 7.5% year-over-year. Full-year gap net loss was 4.8 million, or 11 cents per share on a fully diluted basis, compared to net income of 10.2 million, or 26 cents per share, in 2019. Full year adjusted EBITDA was 14 million compared to adjusted EBITDA of 26.9 million in 2019. Turning to our view on the first quarter of 2021. We entered 2021 with strong industry tailwinds, a backlog of large expansion projects, and great momentum in the business. For the first quarter of 2021, we expect revenue to be in the range of $61 million to $65 million and non-GAAP operating income to be in the range of 8% of revenue to 10% of revenue. As has been our practice in the past, these numbers assume no impact of fair value of issued warrants in the quarter. In summary, we are very proud of our Q4 results as we continue to execute on our strategy and capitalize on the long-term opportunity ahead of us. Cornit is in a very strong position and we are more confident than ever in our ability to achieve our 500 million run rate goal ahead of plan while expanding gross margin and profitability. I will now turn the call back to Ronen.

Thank you, Alon. With that, we are ready to open the call for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. Our first question is from Jim Silva with Citigroup Investment Research. Please proceed.

Thank you very much and good evening, and thank you for all the details thus far, and congratulations on good results in Outlook. On the Outlook, can you talk to us a little bit about the supply chain, specifically components? It seems like there's a lot of shortages around the world, less airplanes flying around. kind of your ability looking forward, you know, do you have enough components for like one quarter or three quarters, or how should we think about potential constraints to your supply chain?

Thank you, Jim. Good question. We don't see any constraints on supply chain. As you know, we produce our systems in Israel, working very closely with our contact manufacturer, both Submina and Flextronics. We just about to move to a new implant that has capacity well above what we will need in the next 10 years. So we don't see any constraints on supply chain. The only negative side on supply chain, as you know, the cost of shipping is going up everywhere. And we see it as well on our business. The cost of logistics is going up.

And then my last question is on your meetings with customers, you know, typically shaking hands, in person meetings and trials. Are those getting better now that there's some parts of the world, such as Israel, that are opening up with the vaccine a little bit sooner than, say, North America? Or is it still kind of pretty challenged because your results are really strong? I'm just wondering if things are starting to even get a little bit more visibility from where you sit for demand.

So again, great questions. Bottom line, when we're looking at Q4, actually the mix that we have between net new customers to existing customers is very healthy. So we see many net new customers joining our business. And we are gaining this momentum, actually meeting with them in many cases through Zoom meetings. I'm going to visit other customers or reference sites. We are doing live demonstration from our experience center all around the world and including in Israel, live with our customers. It's very, very efficient. They're sending us the material in advance. We're doing all the testing. We're sending them back the material after it was produced and printed. It's working quite well. Actually, in terms of productivity, I can tell you even from my hand, I find myself sometimes having three, four Zoom calls on one day with key customers, and it's very, very efficient and beneficial.

Thank you so much for the details, and congratulations.

Thank you. Thank you.

Our next question is from Tavi Roshniri with Barclays. Please proceed.

Hello, this is Peter Odetsky. I'm for Tavi. Congratulations on the quarter and welcome to you alone. I was wondering if you'd give us some color on the consumables mix for the year of the quarter. What I'm wondering is typically in the fourth quarter you would have mixed skewed a bit more toward consumables than the rest of the year. I'm wondering if that's changed at all given this sort of accelerated pace of system sales you've been seeing. And then also, I'm sorry if I missed it, but did you mention any greater than 10% customers in the quarter?

Hi, this is Alon. So, yes, I mean, typically in Q4 we have higher demand for consumables, and this quarter it was the same and even stronger. We had very strong demand for consumables, which supported our business very well.

I can add that in this quarter, Q4, we broke the record in terms of the supplies growth. uh really really strong supplies growth we are we are not sharing the numbers but it's well above what we expected and we see the momentum moving into 2021 in terms of your second question about the customers that has more than 10 we have only one customer that had this quarter more than 10 and it wasn't a global strategic account it was not a global strategic account

But that's very helpful. Thank you so much.

Our next question is from Brian Drab with William Blair. Please proceed.

Hi. Congratulations. Thanks for taking my questions. I'm wondering if you could talk a little bit more about the automation solution and, you know, when might we hear more about that? How much does it speed up the process? Is it applicable to machines across your portfolio? Is there anything else you can share today on that?

Yeah, Brian, thank you very much for the question. So the automation, it's a breakthrough solution. There's nothing like this in the market. It's one of a kind. We have a strong IP on the solution, and we are planning to release it in the middle of the year. This solution... is an option on top of the portfolio that we have. We'll serve the Atlas portfolio, including the new systems, the new portfolio that we are going to release in the second half of the year. In terms of the efficiency and the productivity, so it really depends on the operators that are running the systems. So today, for example, the atlases can run at above 100 impressions per hour. But the limitation of running constantly 100 impressions or above per hour on the atlases is actually the operator. Sometimes the operators are taking breaks and they're tired. Maybe they can do it in one hour, but the second hour they will go down to 80. The automation enables the operator to do his job in a constant way, much more easy, and in constant quality in the end. So it will improve the quality, it will improve the ease of use, and the productivity. We expect that the productivity will be increased by around 20% on average.

That's really helpful. Thanks. And so it's a solution, just to be clear, that doesn't completely remove the need for an operator, but it makes an operator much more efficient.

Correct. It doesn't remove the operator. It helps the operator to load and unload from the systems in consistent way. In some cases, we can see one operator running two systems with this system, with automation. Got it.

Okay, thanks. And then can you help me envision this 3D embroidery application a little bit better and also talk about how much that expands your addressable market, as you alluded to in the press release?

Yeah. So we are not ready to share too much information at this stage. We are going to share much more information in April, and of course we are going to show it to the market in June. It will be part of the new portfolio that we are releasing to the market. Again, it's a breakthrough solution. There's no other digital solution that can enable those applications. Some of those applications will never exist before. So what the system, the new system, will enable to do is to print actually on garment, on any type of garment. It could be polyester, it could be cotton, blended, a 3D images. So actually we can build images, 3D images, which can go up to 700 micron above the surface. and to emulate all kinds of applications. One of the applications is embroidery, and we are getting excellent results and excellent feel of embroidery. Another application is high-density vinyl, which is very, very important, for example, for the sport and the leisure market, and also for heat transfer, which is also relevant very much for the sports market. So we believe at this point, that in terms of the addressable market, it will increase corn eat addressable market by about 25% to 30% from what we have today. So it's a huge increase for our time, and we believe that on top of that, it will create new applications that were never been able to produce before.

That's great. Just one clarification. Is it a system that Embroiders or it simulates embroidery as part of the solution?

It simulates embroidery. It's using our process. It's a printing, but it feels and looks like embroidery with many, many additional advantages. But we'll keep it a bit later in April. We are going to share a bit more information on that.

Thank you very much.

Our next question is from Patrick with Stifel. Please proceed with your question.

Thank you very much and congrats on the nice quarter and end to the year. Ronan, first off, you posted some very strong services numbers and in your prepared remarks you talked about the increasing attach rates. Can you give a little bit of color if some of those attach rates are now for multi-year type of service agreements, or are they still kind of, quote, singular year contracts, which you have to get, quote, renewals with these customers?

So we already, about a year and a half ago, we moved to a full contract. Every machine that we are selling, we are selling it with a contract. There's no other way to buy from us a machine, and it's a It's not for one year. It's for multiple year contracts. And we see a very nice recurring revenue coming from the service business.

Great. That's helpful. And maybe as a follow-up, Alon, in terms of the operating model, you guys posted very strong gross margins. Obviously, products mix had contributed to that. As you look at 2021, you talked about OpEx increasing to help grow with the business. One, can you talk about some of the focus items in R&D? Are they for the embroidery product that's going to be released, or are they for others that are, quote, yet to be seen until, say, 2022 and beyond? And how much do you need to add more in terms of the sales and marketing front to support these new initiatives?

Okay, so... As we said, we continue to invest in the organization. As you mentioned, the focus is R&D and sales and marketing, the go-to market. In regard to R&D, we invest actually across the board. We are enhancing our capabilities in the core occupations in R&D, in software, in new projects, workflow so there is a massive investment in in R&D we did it in in q4 and we will continue in 2021 and the same goes with with sales and marketing we increase our coverage with the professional salespeople across all regions and and yes I mean we will continue to invest in 21 It's the same.

Let me add one more point. As we mentioned, on our mission for the $500 million run rate goal, we said and we are committing to expand our gross margin and to bring leverage also on the bottom line of the operating profit. So you will see doing 2021 leverage on operating profit. We will bring small leverage on the operating profit. We don't want to maximize it because we see a massive opportunity in the marketplace and we would like to invest as much as we can while maintaining our commitment to the market. But we would like to invest as much as we can in more fit on streets, in more R&D and other parts of the businesses because this is the time to invest and to grab the market and not to milk the cow to the maximum.

Thank you very much.

Our next question is from Jim Ruschetti with the Edelman Company. Please proceed.

Hi, thank you. Good evening. Question about, clearly, it sounds like you had a very strong quarter for supplies, and you did call out the strength in Presto, and I wonder if you could talk a little bit more, Ronan, about what you're seeing there. It sounds like utilization is at a pretty high level. Is that fair to say, or is it just certain customers have really begun to deploy this?

Yeah, so we have tremendous success on the Presto. Now let's ask ourselves from where is it coming. Actually, these inflection points are going on in the textile market, as we've discussed. We can see the move to on-show production on the textile, if it's on the fashion market or on the home decor market. We can see it across Europe, US, and also in Asia, really moving to on-show or near-show production. We have a system, which is the Presto, which is one of the kind, and we are the only one that's enabling on-shore production in a full, sustainable way without any pre-treatment, without any post-treatment. I can tell you, this week we have many, many designers preparing here in our facility in Israel for the Corny Tel Aviv Fashion Show. They are amazed with what they can see from coming out from the press store. They're actually designing on the floor their ideas and they can see it immediately going out of the press ready to just cut and sew. This is Han Herdorf and we are gaining huge momentum. The durability, the quality and the hand feel is nothing like you can see in other places in the market. And we believe that the entire market, the entire textile, well, the fashion market and the home, the core market is moving into on-demand production on show, and we have the right solutions to address this market.

Thank you. It appears that you're pleased with the progress at Custom Gateway, and I guess you've only had the opportunity the business for less than a half year. Can you say, looking out at the second half of 2020, how many of your existing Courtney customers have you been able to bring into the custom gateway solution portfolio?

So, Jim, we are not ready to share numbers at this stage. As we promised at the middle of the year, we will be able to share a bit more numbers on the business line and also target for the future that we expect from this business line. What I can tell you, there is a huge excitement both from the marketplaces, from brands, from retail, from online players, and also from our customers joining to the custom gateway solution we really enable our customers to be more efficient on the production flow we enable a customer to connect to major brands we can see huge increase coming or increase of volume of impressions that coming from brands and marketplaces directly into our customers and we see very very nice increase of impression and that are coming from this system. So we see a big potential of revenue and margin growth coming from this business moving forward, and we are very optimistic about this move.

Thank you. And last question, if I may, just with respect to the new products, the ones that you are most excited by, for the most part, The contribution that you're anticipating for these products this year, are they skewed more to the second half? Will we see a contribution in Q3?

Yes, absolutely. In Q3, you will see contribution from the new products, also from the automation, and also from the application. So we will see it already in H2. Thank you.

Our next question is from Rod Hall with Goldman Sachs. Please proceed.

Yeah, thanks for the question. I wanted to start off with the revenue that you printed in the guidance. A lot of long ways ahead of your guidance for the Q4 and then really strong guidance in Q1. Could you maybe highlight the one or two things that surprised you there and push that way above the high end of your guidance range for Q4? And then I have a follow-up.

um so few few things first of all we discussed already on the growth and the supplies so um it was a very very strong uh supplies quarter the q4 uh it was also a very strong uh quarter for the service school while our systems was also very strong so it's combination for all those three businesses and what we see on on the on the system is things that we have never seen before. We see relative new customers that just joined Kornit about a year ago, increasing capacity, volume very dramatically, and purchasing multiple systems. When I say multiple systems, we see a few cases of more than 10, more than 20, and even 50 systems of orders without getting to names of customers and even more than that. So surprisingly, what surprised me is the magnitude to seeing so many customers are ordering multiple, vast, many multiple of systems.

Is that just a critical mass thing, do you think? Like, do you feel like just hit a point of

recognition that these things are out there and what could be done with them that's driven this acceleration all of a sudden or the, the, the acceleration coming from this, from the inflection point that we were talking about, uh, uh, two quarter ago, uh, is really about the, the move into the e-commerce, the online marketplaces are booming, the moving to own show. Uh, we can see the growth in the strategic account and existing account. Our systems, you know, the growth in the atlases, the Vulcan, the AV, HD, the Presto, which is relative new segments for Cornet, new product for Cornet, new business is growing fantastically. We can see the mix between the new customer to existing customers. The recurring revenue is very, very strong. And it was a very, very strong peak season. So it's a combination of all those together.

I think that if I can add, it was not only our customers preparing their infrastructure for the peak season, but they kept investing and we got strong demand also during the peak season until the very last day of the quarter. So we see, you know, again, as Ronen mentioned, I mean, this is absolutely, you know, related to the inflection point and not just, you know, the short-term peak season.

Okay, and then my, thanks for that. My last question was just on PolyPro. Could you maybe give us a little update on how things are going there?

Yeah, so on PolyPro, we're getting a very nice demand We are starting to see very good traction of the current PolyPo solution. Part of the new NPI, the new product introductions that we are bringing in the middle of the year is additional solution, expanding the portfolio of the PolyPo and taking it to the next level in terms of productivity, in terms of the quality, in terms of the efficiency. You will see an amazing quality, durability coming out of this new product that we are bringing to the market. It will really going to open for us the at leisure and the sports market and we are very optimistic about the growth that we will see in H2 of the year from the poly market.

Okay, is that the same thing as the 3D printing thing, or they're totally different? I thought they were different, but is it the same thing that you're talking about? Right, okay. Okay, thank you.

And our next question is from Greg Palm with Craig Hallam Capital Group. Please proceed.

Yeah, thanks for taking the questions, and congrats on the results here. I know you don't usually give full year guidance, but, you know, looking back at history, you know, Q1 tends to always be the low point of the year, and usually you see kind of a step up in revenue in the second half versus the first half. So I'm just curious, is there anything unusual that we should expect this year, or would you expect those sort of same seasonality trends to hold this year as well?

Greg, you're absolutely right. You should expect the same seasonality. Okay, great.

And I mean, if we think about that specifically, maybe help us bucket out what the largest drivers of that is. I mean, you've kind of alluded to this new customers, and I'm curious if that's outside your core business or is that sort of incremental customers in sort of that core area? Is it

know capacity expansions from from new you know or from existing customers and then maybe you know what the contribution expectations are from new products as well yeah so what we can say that uh our existing customers and even new customers they're adding capacity because they expect 2021 to be to to to see it as a growth year for them uh they see um the demand and they see the volume coming, they're actually on constant peak season. Already from April, my timeframe, they're in constant peak season. During December, it was the peak of the peak, and they see it continuing to the Q1, and they're adding more capacity. For example, our strategic accounts and our key accounts are adding more capacity, many of them opening additional sites. If it's across the US, if it's across continent, moving to the Europe and even into Asia. So we see expansion of additional sites and expansion within the site of additional capacity of more systems. And also they are moving to higher capacity systems. So many of them are moving from the avalanches Into the the atlases we see also goes into the Vulcan So this is one area. We see the goals coming also from from totally net new customers Digital customers that entering the see the opportunity in this market and starting in there gaining momentum very very fast and as I mentioned the presto is relative new the DTF is relative new business for us, which is another a uh a big big growth engines and on top of that you know that the poly the poly one and a half years ago was not exist at all and again we are now gaining momentum as well on the policy side okay and if i could just sneak in one clarification i think your answer to a previous question about about q4 and what drove sort of the upside

I think you mentioned that the growth rate, or at least the answer almost implied like the growth rate in the consumables business surpassed the growth of systems. Was that right, or did I mishear something?

No, I think that the growth was in all fronts. I mean, we had a nice growth in systems, in consumables, and in services. and we had very high growth in consumables, as we highlighted, but the growth was in all different types of business we have.

Okay, great. Thanks for all the color. Best of luck going forward. Thank you. Thank you.

And that does conclude our question and answer session. I would like to turn the conference back over to management for closing remarks.

Great. So I want to thank everyone for joining us on this afternoon call. I would like to take this opportunity to thank our employees for the dedication and the passion to our customers. I would like also to thank our investor community for their trust and partnership. 2021 will be an exciting year for Cornete, and we are more confident than ever in our ability to execute on the massive opportunity ahead of us. We would like to wish all of you a good health and hope to see you soon, face-to-face, not through Zoom, in 2021. We wish all of you good night from Tel Aviv. Thank you very much.

Thank you. That does conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.