Kornit Digital Ltd.

Greetings, and welcome to the Cornett Digital's third quarter 2023 earnings conference call. As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Mr. Jared Maimon, Global Head of Investor Relations for Cornett Digital. Mr. Maimon, you may begin, sir. Please go ahead.

Thank you, Operator. Good day, everyone, and welcome to Cornett Digital's third quarter 2023 earnings conference call. Joining me today are Chief Executive Officer Ronan Samuel, Lori Hanover, Courtney's Chief Financial Officer, and Amir Shaked Mendel, EVP of Corporate Development. For today's call, Ronan will provide comments on the third quarter of 2023. Lori will then review the third quarter numbers and provide our fourth 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 review the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 20F, filed with the SEC on March 30th of 2023, which identifies specific risk factors that could cause actual results to differ materially. Any forward-looking statements are made currently, 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 measures on this call. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the company's earnings release published today, which is also posted on the company's investor relations website. At this time, I would now like to turn the call over to Ronan. Ronan?

Thanks, Jared, and thanks everyone for joining us on today's call. Before we go into our third quarter results, I would like to take a moment to address the situation in Israel. I am sure most of you are aware of the horrific events that have taken place in Israel over the past several weeks. I want to extend my deepest gratitude for the supportive messages we have received from many of you on this call, letting us know that Kornit is in your thoughts. Your support is greatly appreciated. I also want to stress to everyone that we are committed to the safety, security and well-being of our teams in Israel. Additionally, Three weeks ago, we sent a letter to our customers emphasizing our commitment to continuity and telling them to expect no disruption in their daily interaction with Cornit. As of today, I'm pleased to report that the situation in Israel has not materially impacted our business. We have also strategically bolstered our regional inventories to meet customer demands, not just for the upcoming peak season, but also for the first quarter of 2024. As this complex situation continues to evolve, we pledge to remain proactive and implement contingencies as needed. Now, let me talk about our third quarter results. Today, we reported revenues of 59.2 million, which is within the guidance range we provided in August. As a reminder, this includes the impacts of the fair value of issues warrants. Despite a challenging microeconomics environment, we continue to see consumable sales growth. Impressions also increased year over year, marking our third consecutive quarter of ear-over-ear impression growth. We anticipate continued growth in both impressions and consumable cells in the fourth quarter of 2023 and 2024. However, the macroeconomic situation we saw in the first half of 2023 is continuing the second half, constraining system cells in the third quarter as was expected. Despite these headwinds, system sales improved sequentially as we continue to convert orders from ITMA. We also continue to focus on diversifying our customer base, selling our solution to new customers in key growth regions, including LATAM and Asia Pacific, and accelerating our growth into market segments like screen replacement and retail. we are encouraged to see new key customers leverage our technology in emerging application, which we believe can generate meaningful growth for our systems and inks. Traditionally, these key customers have used analog technology, but recognize the quality capabilities and sustainability of our digital solutions. Additionally, we continue to see growth in our direct-to-fabric technology, as evidenced by Q3 being one of the strongest quarters for Presto system sales. We also saw additional upgrades to Max in Q3, as customers continue to see the value of our Max technology, which includes enhanced quality, durability, and productivity. Following the upcoming peak season in Q4, we anticipate hybrid momentum to resume in 2024. We are seeing strong interest for the Atlas Max Poly in the sports and at leisure market. In October, we attended Printing United in Atlanta, where we built additional momentum for this solution. Our customers are most excited about the system quality and vibrancy when printing on synthetic, natural, and blended fabrics. Moving on to the Apollo. Q3 was the first quarter where our initial beta systems were installed and operational. The feedback we have received from our customers is highly encouraging. and we have seen strong indications on systems' uptime, yield, quality, and unique economics. As of today, we have three systems installed in North America, and we expect these systems to be fully operational for the coming peak season. We continue to target general availability for the Apollo in the first quarter of 2024, and we are building a good pipeline of existing and new customers. In summary, this quarter we saw a continuation of macroeconomics headwinds. However, we were able to further diversify our customer base, expand into key textile production regions, and pursue growth opportunities in new applications. Looking ahead, we will continue to take proactive measures to resume sales growth while also focusing on enhancing operating efficiencies across our entire company. Our plan is still to approach break-even on an adjusted EBITDA basis during the fourth quarter and grow profitably in 2024. Now, let me turn the call over to Lori for a closer look to our third quarter financials and fourth quarter guidance. Lori.