Kornit Digital Ltd.

Greetings and welcome to Corneet Digital's second quarter 2023 earnings conference call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Mr. Andrew G. Backman, Global Head of Investor Relations for Corneet Digital. Mr. Backman, you may begin.

Thank you, Operator, and good day, everyone. And welcome to Corneet Digital's second quarter 2023 earnings conference call. Joining me today are Chief Executive Officer Ronan Samuel, Laurie Hanover, Cornyts Chief Financial Officer, and Amir Shaked Mandel, EVP of Corporate Development. For today's call, Ronan will provide comments on the second quarter of 2023. Laurie will then review the second quarter numbers and provide our third quarter outlook before we open it up for Q&A. 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 plans, strategies, projected results of operations or financial condition, and all statements that address developments that the company expects will occur in the future. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause results to differ materially from those 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, which was filed with the Securities Exchange Commission on March 30, 2023, which identifies specific risk factors that could cause actual results to differ materially. Any forward-looking statements are made concurrently, and the company undertakes no obligation to publicly update any forward-looking statements except as required by law. Additionally, the company will be making reference to certain non-GAAP financial measurements 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 press release published today, which is also posted on the company's investor relations website. At this time, I would like to now turn the call over to Ronan. Ronan?

Thanks, Andy, and thanks to everyone for joining us on today's call. Earlier today, we reported second quarter revenues of 56.2 million, in line with the guidance we provided in May, which, as a reminder, included the impact from the fair value of issued warrants. During the quarter, impression grew at a double-digit pace year over year for the second consecutive quarter, driving a steady improvement in capacity utilization. Consumable revenue grew at a strong double-digit rate across our customer segments, including key strategic accounts and throughout all our operating regions. So far in the third quarter, impression growth is again on pace to increase at a double-digit rate year-over-year, which gives us confidence in solid consumable growth for the second half of the year. Our services business also continues to demonstrate exceptional revenue growth during the second quarter and so far during the third quarter as our customer actively upgrade and transition to our Max technology. We are very pleased with the customer feedback we have received on our Max technology and anticipate additional upgrades orders during the second half of this year and throughout 2024. Along this year, services have improved considerably, both in terms of revenue generation and in increased operating efficiencies. System sales volumes remained soft during the quarter, mainly due to continued challenges in capital equipment spending and as our customized design customers continued to work through excess capacity. While we anticipate the prevailing softness in system sales volumes to continue in the short term, we have implemented strategic measures to attract new customers including brands, retailers and digital platforms. Additionally, we are targeting new growth regions within key textile production hubs to diversify our customer base and establish a healthy pipeline for 2024 and beyond. In addition to diversifying our customer base and entering new markets, we have taken various actions to increase efficiencies throughout our operation. Based on our progress to date, we currently expect to approach break-even on adjusted EBITDA basis for the fourth quarter of this year even at a quarterly revenue run rate in the mid $60 million range due to a favorable sales mix of higher margin consumables and quarterly OPEX in the low to mid $30 million range. We are also aiming to deliver profitable growth for the full year 2024. As a result of our focused R&D, marketing, and other efforts, we had a hugely successful EATMA trade shows in Milan. We had a very high customer engagement with new customers from key textile regions such as India, China, Turkey, Morocco, and from Latin countries such as Argentina, Brazil, and Mexico. We also secured high number of quality leads and sales orders for both direct-to-fabric and direct-to-garment systems. For example, at ITMA, we signed a deal with one of the top textile manufacturers in India, which we are planning to deliver in the third quarter. This new relationship opens up a new market for us in India, a market we believe has the potential to meaningfully grow over the next several years. Approximately 60% of deals signed were from net new customer, opening the door for additional systems, consumables, and services sales, providing us with healthy pipeline for 2024 and beyond. The level of energy and innovation Cornit brought to ITMA was incredible, with hundreds of customers and prospects providing favorable feedback for our portfolio. We also unveil our new Apollo high throughput platform and secure several new orders. We expect to recognize revenues for the Apollo in the first quarter of 2024 and are currently focused on building a substantial order backlog for the full year. During the second quarter, we install our first beta system in the US, which is now up and running and we are in the process of installing the second beta in this region. As we have stated previously, the Apollo platform has the potential to provide us with annual consumable and services revenue of approximately $1 million per system once installed and running at high utilization rates. In summary, we have built solid foundation for future growth, and Cronit's long-term growth drivers remain firmly intact, a view reinforced by our recent experience at ITMA. We have made substantial progress throughout the first half of this year, as evidenced by our successful introduction of new technologies and solutions. Our Max platform has been well received by the market, becoming the new standard in the market. Our quality of prints, XDI capabilities, and our ability to sustainably print white on dark fabrics have opened up new markets and driven increased customer interest and engagements. As a result, we continue to diversify our business and bolster our pipeline. We have also materially adjusted our cost structure and operation. reallocating resources to further enable growth engines, such as launching the Apollo platform and capitalizing on growth opportunities in new markets to our direct-to-fabric business. We remain confident that our strategy, product roadmap, and solid balance sheet position us well to generate meaningful long-term growth. On a final note, This morning, we issue our third impact report, which highlights our activities and the progress we made on Kornit's long-term impact strategy, demonstrating our commitment to a more sustainable fashion and textile industry. With that, let me turn the call over to Lori for a closer look to our second quarter financial and third quarter guidance. Lori.