Kornit Digital Ltd.

Greetings, everyone, and welcome to Cornete Digital's second quarter 2022 earnings conference call. As a reminder, this conference is being recorded. At this time, I'd like to turn the floor over to our host, Andrew Backman, Global Head of Investor Relations for Cornete Digital. Mr. Backman, you may begin.

Thank you, Operator. Good day, everyone, and welcome to Cornete Digital's second quarter 2022 earnings conference call. Joining me today are Ronan Samuel, Cornete's chief executive officer, Alon Rosner, Cornete's chief financial officer, Amir Shakad-Mendel, EVP of corporate development, and I'm happy to welcome Laurie Hanover, who, as we announced this morning, will be transitioning to the CFO role in November. Welcome, Laurie. For today's call, Ronan will recap the results for the second quarter discuss the current operating environment, and review some of the actions we've undertaken to help successfully navigate the current market dynamics. Alam will then dive into the second quarter numbers and provide our current third quarter outlook before turning it over to Lori for some brief commentary, after which we will conclude today's call with a question and answer session. 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 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. I encourage you to read the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 20F filed on March 30, 2022, which identifies specific risk factors that could 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 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 our website in the Investor Relations section. At this time... I would like to now turn the call over to Ronan. Ronan?

Thank you, Andy, and good day, everyone. Thank you for joining us on today's call. As we reported this morning, second quarter's revenue were $58.1 million, net of approximately $4.5 million of non-cash warrants impact related to a global strategic account, in line with the preliminary revenue range we announced on July 5th. As a reminder, the gap between the guidance we provided in May and our second quarter results was driven by a shortfall in DTG systems revenues, mainly in the American regions. Clearly, not the great first half that we were expecting as we entered the year. As we look across the business, we see some customers, particularly in certain e-commerce segments, continue to digest excess system capacity built in the past two years and navigate macro-related issues, while others continue to grow nicely, although at a more normalized pace. We also see certain customers make good progress on their expansion plans and new production facilities. As a result, Several deals we expected to complete at the very end of the second quarter have either already closed in the third quarter, remain in our backlog, or have moved to 2023. Looking at the consumables, revenues were in line with our expectations, as some customers have walked through the inventory build-up experience in the last few quarters. we continue to expect consumables to grow sequentially throughout the balance of 2022 as our customers gear up for the peak seasons in the third and fourth quarters. For the first half of the year, we saw good growth in both EMEA and Asia Pacific. In EMEA, The pipeline for the second half of the year is improving as the team continues to make progress with several major brands and retailers across the region. This includes C&A, Hype, and one of the world's top five fashion brands that is vertically integrating a number of Atlas Max systems into one of their production facilities. They are also exploring a broader, larger-scale global deployment. In Asia-Pacific, after a very long period of lockdowns, especially in China, the region continues to open up. Our team is traveling again, meeting with customers, prospects, and making progress with several large brands, digital platforms, and strategic accounts. We are also engaged with several major manufacturers in the region that are responding to the growing demand from their global customers to transform their supply chain and shift more production volumes to near-shore, shorter-range production. In the Americas, Latin America is ramping up nicely, driven particularly by demand for the Presto Maxx. We are seeing more new business opportunities with mid-market brands and retailers as the broader U.S. apparel industry focuses on margin and supply chain improvements. We believe this can be well achieved by shifting more production volumes from traditional offshore mass production to on-demand at a closer proximity to consumers. On the DTG side, we have recently started working with a specialty retailer of casual apparel operating over 200 stores across the U.S. In addition, a major onshore apparel manufacturer for some of the largest licenses and retailers in the U.S. is making their first entry into digital printing with Cornit, having historically produced 100% on analog equipment. And finally, we continue to work in a very close partnership with our largest global strategic account on their meaningful domestic and international expansion plans. We have a clear understanding of their key focus areas potential meaningful new opportunities, and our relationship is stronger than ever. While the overall operating environment remains uncertain in parts of our business, the opportunities ahead of us remain firmly intact. However, to successfully navigate the current market dynamics, we are focused on three key areas within our business. First, we continue to work with brands, retailers, and fulfillers of all sizes on helping them better understand the operational and financial benefits of shifting production volume to Kornit's on-demand sustainable mass production digital solutions. Second, ensuring a successful rollout of our NPIs, including Presto Max, Atlas Max Poly, Atlas Max Upgrades, and a new user interface for our CornetX offerings, in addition to the widely anticipated launch of the Cornet Apollo in mid of 2023. Feedback on the Apollo has been excellent, validating that our technology is superior and fits perfectly with their long-term growth plans. Simply stated, customers, including some of our largest strategics, want Apollo now. And third, returning to profitability. While we have made some tough but necessary decisions recently, including a forced reduction in force last month, we continue to strategically review all aspects of our business and will continue to adjust our cost structure as needed without sacrificing our key growth initiatives, investments in long-term programs, and our ability to support our customers. Okay, two more comments before I turn it over to Alon. As announced this morning, Our board authorized the repurchase up to 75 million of the company's ordinary shares. We believe this is a flexible way to return value to our shareholders while not adversely impacting our ability to execute on our strategic growth plans. We also announced that Talon will be stepping down as Cronit CFO in November for personal reasons. Alon has been an integral and trusted member of our executive management team and an extremely valued colleague to everyone here at Cornit. I am very proud of what Alon has built since joining the company, especially helping us navigate through the global pandemic. We are all extremely grateful for all his accomplishments and wish him only the best in his future endeavors. Thank you, Alon. Also announced was the appointment of Lori Hanover as our new CFO. Lori has served as a member of Cronit's board of directors since 2015 and served as our audit committee chair and as a member of our compensation committee. Lori knows the management team very well has a deep understanding of our company and brings over 25 years of CFO experience from multiple industries. Since I joined Cornet as CEO four years ago, Lori's advice and counsel have been invaluable to me. As such, I have no doubt that she is best positioned to energetically step into this role from day one to build upon and execute on Kornit's exciting long-term growth objectives. Welcome, Lori. With that, let me turn the call over to Alon for a closer look at the numbers and the outlook. Alon.