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spk09: Good morning, ladies and gentlemen, and welcome to the Corny Digital First Quarter 2024 Earnings Conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. And this call is being recorded on Wednesday, May 8, 2024. I would like to turn the conference over to Jared Neiman, Global Head of Investment Relations. Please go ahead.
spk13: Thank you, operator.
spk08: Good day, everyone, and welcome to Corny Digital's First Quarter of 2024 Earnings Conference call. Joining me today are Chief Executive Officer Ronen Samuel and Lori Hanover, Corny's Chief Financial Officer. For today's call, Ronen will provide comments on the first quarter of 2024. Lori will then review the first quarter numbers and provide our second 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 US 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 28, 2024, 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 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?
spk11: Good morning, everyone, and welcome to our first quarter of 2024 earnings call. Today, we reported revenue of 43.8 million and adjusted EBITDA margin of negative 18%, which is within the guidance range we provided in February. I am pleased to report that we also generated positive cash from operations during Q1, which was ahead of the plan. Overall, while our markets remain challenging, we saw few positive signs in the quarter, including continued -over-year improvements to utilization, impressions, and consumable sales. We also saw a strong reception by our industry on both the Apollo and the initial pilot for a new all-inclusive click or AIC model. First, on the Apollo. After announcing general availability in January, we successfully concluded the beta programs in all three of our initial Apollo sites. These customers gave very positive feedback overall on the systems and have all cemented the systems as a permanent piece of their production flow. In addition to this, one of our beta customers has already placed an order for four more Apollos in addition to their beta systems. And they have indicated to us that they expect to order another two systems this year. This means by the end of 2024, we expect this customer to have seven Apollos on their production flow. This customer is planning to use their Apollos to transition mid-size runs from the screen printing business to digital. Last week, another beta customer placed an order for the second Apollo, which is another encouraging sign that the product is adding significant value and is functioning as expected for these customers. Beyond our beta customers, we have already built a strong pipelines of orders from both new and existing customers in 2024. And we have already started to add to our pipeline for 2025. As a result, we are now working with our contact manufacturers to increase production capacity of the Apollo systems for 2024 and beyond. One of the factors helping to build this strong pipeline on the Apollo is the AIC program, which we announced the pilot last quarter. The feedback overall from our industry has been highly positive with both new and existing customers expressing the preference for the model. We are confident that the introduction of this program, even with its initially limited scope, has helped us to make strong progress in situation where we would not have been able to traditionally. After improving our customer success organization, advancing our quality standards and improving the TCO of our solutions, the last step which we have needed to overcome is removing the barriers to entry and expansion. These barriers have historically included uncertainty in unit economics and large initial capital investment. Solving these barriers to entry is key in our current market to help our industry continue their digital transformations through challenging macroeconomics headwinds. And even more important, longer term, to help us capture the major digital conversion opportunity that has always been core to our vision. We also see the model as being favorable for us, especially given the volatility in our market today. The minimum volume requirements inherent in the AIC program give us a clear line of sight into the revenue potential of this model, which is more predictable than our traditional model due to its recurring nature. So overall, we believe this is a strong solution for both our customers and us. And we expect to deliver additional systems within the pilot program this year, which we will closely monitor in the field. I would also like to provide an update on our direct to fabric business and expand on the new product announcement we made at FESPA. First, our direct to fabric business is a strategic pillar of our digital transformation strategy continues to drive revenue diversification for us across our product mix, application set, and geographical concentrations. This quarter, we saw in direct to fabric production a strong double digit growth year over year in ink and impression. I'm also happy to report that we are continuing to progress with our key customer in China in the footwear market, which could be a remarkable opportunity for Kornit in the medium term. Lastly, we are in the middle of our beta testing with few customers for the Atlas Max Plus. The initial feedback is very encouraging, both on the increasing productivity of around 15 to 20%, and the improvements in production consistency, flexibility, and additional applications. One of these new applications is the new Max Transfer Solution, which we have announced at FESPA in March. The solution brings the same level of consistency, quality, and sustainability that our customers have come to expect from Kornit products and adds placement versatility for certain incremental applications that our customers seek to address. We see this as a complementary solution to our customers, which will expand our addressable impressions. We received encouraging feedback on the solution, and we will continue to share updates with you as we walk through the developments. So in conclusion, macroeconomic conditions remain challenging to start the year as expected. However, we saw several positive signs that our new products and models are resonating well with both new and existing customers. Moving forward, we are dedicating our attention and resources to ensuring that we have put all the necessary pieces in place to deliver on our mission of transitioning long-run production to sustainable on-demand production globally. Now, let me turn the call over to Lori for a closer look at our first quarter financials and the second quarter guidance. Lori.
spk07: Thank you, Ronen, and good day to everyone. First quarter revenues were 43.8 million within the guidance range we provided in February. This quarter, consumables grew year over year, which was again more than offset by a decline in systems and service sales as expected. Moving to margins, first quarter non-GAAP gross margin was .5% compared with .2% in the same period last year. The year over year improvement is primarily attributable to a better mix between comparatively higher margin consumables and systems and lower fixed costs due to our restructuring efforts. Looking at operating expenses, total first quarter non-GAAP operating expenses were 27.1 million, a decrease of $5.3 million, or .6% from the 32.4 million in the same period last year. This reduction in expenses reflects our cost savings and restructuring initiatives. As discussed in our previous call, we took decisive action to align our cost structure with our revenue expectations and to enable operating leverage when we return to growth. Included in this restructuring was a meaningful workforce reduction, a consolidation of facilities, and a phasing out of our legacy platforms. As such, we incurred additional restructuring charges of 1.7 million for the first quarter as expected. We continue to expect this restructuring plan to save approximately $20 million in expenses during 2024 versus the full year 2023. First quarter adjusted EBITDA loss of 7.8 million was significantly better than the adjusted EBITDA loss of 14.7 million in the same period last year. Adjusted EBITDA margin for the first quarter of 2024 was negative .9% near the top end of the guidance range we provided in February, again, reflecting a meaningful improvement year over year. Our cash balance, including bank deposits and marketable securities at quarter end was approximately 551 million. This quarter, we generated positive cash flow from operations of 4 million. This achievement was primarily the result of a strong collections focus, and it underscores our commitment to returning to positive operating cash flow in 2024. As Ronen highlighted, we are encouraged by the response to date of the AIC offering. There is both a higher level of engagement with targeted customers and a higher ratio of sales close with the AIC model versus our expectations. Also, the qualified opportunities now in discussion appear likely to convert to orders in a similarly higher proportion as we have seen in Q1. Should this be the case, it will reduce our revenues in the short term, meaning the second half of this year. We are committed to tightly monitoring, managing, and learning from this pilot program, due in large part to the short term impact on revenues and cash. Moving on to our share repurchase program. For the first quarter of 2024, we repurchased approximately 424,000 shares, spending an aggregate amount of 7.9 million. The average price paid per share net of fees was $18.55. Approximately 11.4 million remains available for share repurchases under our previously authorized program. Turning to second quarter guidance. We currently expect revenues for the second quarter of 2024 to be between 47 million and 52 million, and adjusted EBITDA margin to be in the negative 10% to 0% range. That concludes our prepared remarks. With that, I will now turn it back over to Ronen to open up the call for Q&A. Ronen?
spk11: Thank you, Laurie. Operator, we are now ready to take questions from the audience.
spk09: Thank you so much, presenters. And ladies and gentlemen, we will now begin the question and answer session. Should we have a question, please press the star, followed by the number one on your touchdown phone, and you will hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press the star followed by the number two. And if you're using a speaker phone, please lift the handset before pressing any keys. And one moment please for your first question. Your first question comes from the line of Greg Palm of Greg Hallam. Your line is now open.
spk06: Yeah, thanks for taking the questions. Let's start with Apollo. And maybe this is a two-part question, but thanks for the update and the color there. I guess, number one, you talked about one of your beta customers and a larger scale order this year. Are they utilizing the AIC model for that? And then just sort of generally speaking, more of a pipeline comment, but what gives you the confidence to already start thinking about increasing capacity later this year and in the next? Is that just based on feedback? And then to be clear, are you basically out of slots for this year? Have you basically sold all your remaining slots?
spk11: Yeah, thanks, Greg. I will refer first of all to the Apollo and then a bit about the availability. So first, we are really excited about the progress that we have around the Apollo and the feedback we are receiving from our customers. First of all, before I share some of the feedbacks, we need to understand that Apollo is really opening for us a totally new term that we're going after. For years, we were going after the customized design. For the first time, we have a massive opportunity to go after the bulk apparel. And we start to see our customers that using the Apollo going after that. So this is the strategic intention. This is a huge shift for the company and a massive opportunity moving forward. As for the beta, all three beta cemented the Apollo as part of the production flow. We received very positive feedback from all three of them. First of all, in the productivity, this is the most productive digital solution exists in the planet. In terms of the quality, this is by far the highest quality, equal or better than any screen solution out there. And in terms of automation, require only one operator. This is a breakthrough from the feedback that we're getting from our customers. As for the orders we already have received, one of the beta customers already placed an order for four additional Apollo, which one of them we are shipping this quarter. On top of that, he told us that he will place another two systems actually rushing us to place another two system this year. So in total, he will have seven system of Apollo this year, and he's already talking about next year. Second customer, customer of beta customer, just last few days ago, an order for the second Apollo. And we expect also the third customer, beta customer to place an order early next year based on our discussion with them. On top of that, we need to understand that we are collecting orders. So we already have order, and the pipeline look very, very strong. The order book looks very strong for 2024. And I can say that the 2024 is full from a pipeline perspective and order book. And what we see that it's open for us, not only existing customer, but totally new customer from the bulk apparel that we were targeting as part of this pipeline for 2024. At this stage, we're really building already the pipeline for 2025, and it start to look very, very promising. We are working with our contact manufacturer to increase the production already this year, and definitely beyond which we expect acceleration of delivery in 2025. I can tell you Greg, it's a game changer. It's a real game changer for the industry, it's a game changer for Cognit. And we opening our new experience center in two weeks from now in Europe, in parallel to the Drupal event, and we're inviting many customers to come and join us for this opening where we are going to show the Apollo, and it will be the center of excellence for the Apollo on a worldwide level. As for your question regarding these customers, that all the multiple systems, some of those systems are on the CAPTC model, some of them are on all inclusive CLIC model.
spk06: Okay, great. Thanks for covering everything, I know that was a lot. I guess just my second follow-up has to do with the AIC, with the CLIC model, and you talked about or hinted at maybe some implications for the second half. Can any way to quantify how that might affect the model in any sort of way?
spk11: Yeah, so I'll touch on to one of the value of the AIC that we see, and the second, what is the implication that we believe that we will have for this year. So on the AIC model, the all inclusive CLIC model, we are still in a pilot stage, so it's very early to get into too much detail, but what is the intention behind it? The intention behind it is to increase our time, is to go really after large customers, potential customers that now are using analog and printing long runs of jobs, and convert them to digital. Many of them never use digital, they're new to digital. Some of them did, but they're looking to way of really expanding further to digital. In the last few years, we worked very hard to develop our technology to meet what this market needs in terms of expectation of quality, the pre-quality, the productivity, the application range, the TCO of our technologies, and we believe that we crossed the line on all of them, and now we have the right fit. The last milestone for introducing of this program is to solve really the last barrier of entry for those customers. One of the barrier of entry is really addressing the uncertainty of the unique economics. With this model, they know exactly how much it will cost them every impression, every shirt that they print, every hoodie that they print. They know exactly how much it will cost them, so it's easy for them to compare it to the analog world. It's also limiting, reducing the risk of the initial capital investment. So it's taking off the initial capital investment, of course, is they are committing to a minimum specific volume as part of this program. The feedback that we have received from customer till now, customers that are now using it and customers that will use it, is really encouraging. We already closed a few additional deals, as I mentioned, on this model, some of them with existing customers, and some of them with totally new customers that in the past we couldn't penetrate. And this model and the Apollo really opened the doors for them. This model is also very favorable for us, as there is a commitment of minimum volume that gives us a clear line of sight on the revenue we're expecting from each system and from each customer. It will give us more predictable revenue than the traditional model. It will provide us better volume, higher utilization. We expect customers to use the system in much higher utilization that they're using today due to the commitment. So it will drive more impression and more ink. And it will open, of course, as I mentioned, new customer and new market for us. We expect Greg to deliver more additional systems as part of the pilot this year with additional customers. And what I can say regarding H2, and it's about looking at where we are in the program and what are our expectations in the program in the next few quarter of 2024. We're actually expecting that revenue, if you look at the revenue of H2, to be between 20 to 25% higher than H1, including the program. So you will see an increased revenue. Traditionally, H2 is higher than H1. We are going to continue to see H2 higher than H1 in about 20 to 25%. We also expect that OPEC, like you saw in Q1, will be in the same range across all the quarter of 2024. We also expect for the fully positive adjusted EBITDA margin. As we promised in the last call, we will be positive. We are expecting to be positive on adjusted EBITDA margin. And we expect for the full year to be positive cash flow from operation. So while there is some effect, positive, and some other effects on the financial, we still are committing to deliver the portability, the EBITDA, the cash from operation, and the growth in H2.
spk13: Okay, awesome. Appreciate all that color. Thanks and best of luck.
spk01: Thank you. Your next question comes from Chris Moore with CJS Securities. Please go ahead.
spk05: Hey guys, thanks for taking a couple of questions. Maybe we'll stay with the AIC. So just trying to understand from a longer term perspective how the model impacts your gross margins.
spk13: So
spk07: first of all, we would not go into this program if we didn't think it would deliver at least the same gross margins that we're seeing, but we're hoping to see even better gross margins. Part of the reason that we're capturing this as a pilot program is to validate those assumptions and ensure that we have it all bolted down so that we can speak more definitively as we look at the model going forward.
spk05: Got it. It's helpful. Ronan, you mentioned the Atlas Max Plus. Can you maybe just talk a little bit more about the expectations for the system, kind of when it's gonna be released and any specifics around there?
spk11: Yeah, so we need to understand we are in the beta. We introduced it to the market it's the first part few months back. We are running few beta sites right now and the feedbacks are very encouraging. First of all, about the productivity. So this Atlas Max Plus will provide additional productivity to our customers, something like between 15 to 20% additional productivity. And this is confirmed by the beta customers that are running it now. The production quality and consistency and flexibility and is on a different level. So we are taking all those elements of quality and consistency and flexibility to much higher level and of course, additional application. One of those application is what we call Max Transfer. The Max Transfer enable our existing customer to use the Atlas Max Plus and to print directly on film and to use it for a placement on a garment mainly for application of multi-placement on garment. The main differentiator that we are bringing to the market is mainly on the quality or the consistency. And as you can expect, also sustainability because this is something that we are driving in every solution that we are bringing and this is a breakthrough in terms of sustainability that we are bringing to this solution. Overall, it's a complementary solution in terms of the Atlas Max. We expect to deliver the Atlas Max Plus early Q3 and we expect also to start updating the install base that we have the Atlas Max installed base during H2 into Atlas Max Plus, which will enable them more application, more productivity and of course, for us as well, additional revenue from those upgrades.
spk05: Perfect, very
spk13: helpful. I will leave it there. Thanks guys.
spk10: Our next question comes from the line of Brian Drup from William Blair. Please go ahead.
spk04: Hey Ronan, hi Lori. Thanks for taking my questions. I just wanted to start by trying to reconcile Lori's comments in the prepared remarks around the second half where I believe Lori that you said that there could be some pressure on revenue related to the AIC model and then Ronan, your comment I think that you just made was that you expect total revenue to be 20 to 25% higher in the second half versus the first half. Can you just elaborate on that and reconcile those thoughts for me, please?
spk11: Yeah, so overall for the year, when we started the year, we knew that the year is going to be challenging from a macro perspective and this is exactly what we see overall. So the macro in our market is still a bit soft. But on the other hand, we introduced new technology. We improved many, many aspects of the business. We're entering to new market segments and of course we're introducing this new model which is a recurring revenue model and each one of those units that we are delivering, we will not see initially the revenue from the system or we will start seeing the revenue from the clicks from the first day. So to be very clear, if you take the H1 revenues that we are forecasting or guiding for H1, we believe and we expect that H2 will be in the range of 20 to 25% higher than H1. This is first of all from the seasonality perspective. Usually H2 is much larger in terms of in consumption but we believe that we will deliver additional systems. Some of them will be on the all-inclusive but some of them will be as well on the CAPEX traditional model.
spk04: So that 20 to 25% higher is despite having this pressure from the initial deliveries of AIC units.
spk13: Correct.
spk04: That means that, I mean, it seems like it means pretty good things for next year as those systems ramp up and you deliver more systems because I mean, I would expect for a full year in 2025, these systems that you deliver in 2024 to deliver much more meaningful revenue. Am I thinking about this correctly?
spk11: Absolutely. This is the all-intention of the model. It will give us visibility, it will give us predictability, we will start the year much stronger with a clear understanding on those systems what they're going to deliver for the 2025.
spk04: And then I think Greg asked this but I'm not sure I caught an answer to it but is there any limitation on your manufacturing capacity for those units as you look out 18 months? So
spk11: as you know, sorry. So as you know, the Apollo is a new systems. So we are ramping up the manufacturing. We were planning a specific number of units for 2024. At this stage, we already connected with our contact manufacturing and we are trying to increase the volume, the number of systems for 2024 and even to bring them earlier. And the plan is really to accelerate the growth and number of units into 2025.
spk04: And then just one more, please. The customer that is planning to have seven units, are they based in the United States? And can you talk a little bit more about what you mean by bulk clothing manufacturing? Any more specifics around like what type of market they're serving would be helpful? And thanks very much.
spk11: Yeah, I'll start with the second question because it's an easy one. So bulk production, what we mean by that is really replacing the screen, the analog wall, the printing longer on jobs, not only one off. We used to be in the customized design market. We still in the customized. We are the leader in customized design, but we are shifting gear and entering now to the long run, replacing screen. We call it bulk production. So we are going after that. This is new type of customer, new type of job and much, much bigger time that we are going after. As for the specific customer, at this stage I don't want to disclose it. I'm sure in one point of time it will be disclosed and the customer will disclose it. So I prefer not to provide the clear answer on that.
spk13: Understood on that. Thank you very much. Thank you.
spk10: Our next question comes from the line of Jim Ritchie from Needham and Company Research Analyst. Please go ahead.
spk03: Hi, this is Chris Gringa on for Jim. Thank you for taking the questions. You had mentioned the opportunities you saw with potential for the Chinese footwear market. Just curious if you could provide any additional color on what you saw across the regions. This quarter and what you're seeing and maybe some of the puts and takes by geography.
spk11: Okay, so in the last few years we worked on diversifying our business, both in terms of the different segments that we are going after. As I mentioned before, we were focusing very much on the customized design. And now we're going after bulk apparel, home decor, technical, footwear, fashion, and you touch on the footwear. We also expanded our technology, both in terms of the quality like the Max, the Apollo, the Max+, the Presto, the Dryer, the RSS, the QualiSet, many, many solutions that really addressing those different market technology, both in terms of quality, durability, et cetera. We worked very hard on the customer success, being able to support those big type of customers. We are entering to totally new type of customers like this customer in China, in specific the footwear, but we're entering to retailers and brands across the world. In terms of territories that you were asking, we see growth coming from India. We see the potential in China specifically around the segment of the footwear. Latin America becoming more meaningful for us. Specific areas in Central Europe, we see a potential with a big event coming in Europe and we expect that it will deliver and of course the North America. We are entering to new business models that will help us to penetrate those new geography and new type of customers. And today we are a totally different company. We are much more diverse in terms of the customer, in terms of geography, in terms of technology, in terms of segments. So I'm really happy to see where we are today and believe that from now on we see the light and the sky, a bright sky in front of us.
spk03: Thank you. When we consider Apollo versus an existing platform like Atlas, how are you thinking about the consumption of inks by volume of the Apollo? And are those ink economics similar to your existing ink economics or is there any difference? And over time would you expect as Apollos are fielded and stabilized in the field, could that contribute to any incremental shift in the mix of inks versus systems over time?
spk13: It's
spk11: a very interesting question. And I can tell you first of all that we are in an early stage both on the Apollo and both on the all inclusive clique. So I would be very careful with the way I'm answering to you. And we need to see, we have the average of how much customers are printing on the Atlas Max and how much average are customers printed on the Apollo on the better customers and what they're committing on the all inclusive clique. I can tell you it's a magnitude difference, a very big magnitude difference. If you compare it to the Atlas Max in terms of the volume and what we are targeting in terms of -to-one comparison on the all inclusive clique on the Apollo, it's at least five or more times volume than the Atlas Max Plus.
spk13: And when I say volume, volume is impression and ink. Got it, thank you so, thank you very much.
spk10: Our next question comes from the line of Eric Woodring from Morgan Stanley Financial Analyst. Please go ahead.
spk12: Great, thank you so much for taking my questions guys. I guess I'd maybe like to dig into two of the topics that some of my peers have already brought up. But just on the kind of revenue outlook for the second half, last quarter we talked about modest growth your guidance now implies that for the full year revenue is going to decline year over year. I guess it's surprising because you're telling us AIC is only in the pilot stage so it doesn't feel very large. So I guess my specific question is when we look at the revenue headwind in the second half of the year, how much can you attribute to AIC versus how much is actually just weakness in the non-AIC rest of the business? And then I have a follow up please, thank you.
spk13: So first of
spk11: all it's too early because we're still working on all those AIC systems that we are going to deliver in age two. In general what we see is a general softness in the market while impressions and ink is going very nicely. We saw it in Q1 and we believe that it will continue for the year, it's still tough to close systems due to the macroeconomics. One of the way to do that is also the all inclusive click. And now we need to understand that Apollo, each Apollo that we were planning to sell is around $1.8 million of the system. So each one we are moving to the all inclusive click, there is a short term impact on not recognizing the revenue of the system. But overall what we see, we see this 2024 as the year of transition. You will see that age two is much stronger than age one and I gave the indication of how much. And we believe that we will enter to 2025 with substantial revenue that will come from the all inclusive click and with a strong pipeline for the Apollo. And hopefully also the macroeconomic will change. 2025 should be the year that we start seeing substantial growth in our total business.
spk12: Okay, thank you for that color. And then the second question, again, a bit specific, but when we talk, very good to hear about Apollo pipeline being filled for 2024, you're starting to build the order for 2025. Can you just define exactly what pipeline means? Are these committed non-cancellable orders? I just wanna make sure I understand exactly when we talk about the pipeline, how to think about the kind of stickiness of that or the potential that some of that pipeline could maybe not get converted. So I just wanna make sure I understand the definition of pipeline. Thank you so much.
spk11: When I'm saying that the order books and the pipeline for 2024 is already full, what I mean by that, some of it is PO that we already have in hand a full commitment. And some of it is verbal commitment from customers, seriousness from customers that we believe that it will convert to official PO. We are in the process, it's all very, very fast. But in the coming weeks, we are signing a few big deals as part of this pipeline. But our confidence level when we are saying the pipeline for 2024 is full is very high.
spk12: Okay, and maybe just my last question, and this is just bigger picture is, obviously a lot of kind of positive forward-looking commentary as we think about new technology, as we think about utilization and impressions and consumables, I guess maybe what my question is is how much of the system's weakness is cyclical related to macro and concerns about the broader macro environment? And how much of it could just possibly be the fact that companies have just deprioritized this type of technology and perhaps over the long run, there is a long-term path to growth, but this has just become lesser of a priority. So maybe from a more kind of secular standpoint, the digital world that you're playing has taken a step back. Do you have any anecdotes that you could help share? It's outside of Apollo, I understand that. But outside of maybe the new technology, how we can think about or gain comfort that this is just more cyclical rather than secular? And that's it for me, thanks so much.
spk11: That's excellent question. So the way I would like to answer it is follows. Look, Cogniz, as I mentioned before, in the last few quarters, and we worked for that for the last few years, entered to totally new markets, much bigger than the market we used to serve, much larger customers and much bigger potential, both in terms of number of customers and in terms of impressions. So it doesn't come from lack of potential customer. We believe that mostly it's relate to the softness overhauling the market, both in terms of the interest rate and the capital constraints that our customers are facing. And some of them really looking to increase production, trying to utilize as much as they can the current assets that they have. We see it very clearly on the install base. We see the utilization of the systems really improving. So we know that they are very close to add additional technology. We believe that we have a value proposition today is stronger than ever in those marketplaces that we are going after, both in the DTG and in the direct to fabric. So I would refer most of it into the macroeconomics.
spk12: Okay, that's very clear. Thank you so much for all that, Colorona. Thank
spk10: you. Again, if you would like to ask the question, please press star followed by one on your telephone keypad. We have a question from Tavi Rosmer from Barclays. Please go ahead.
spk02: Hi, good afternoon, everyone. I apologize. I also have a question about the AIC. I'll try to make it short. First, from an accounting perspective, so, Lornane, you mentioned that the price outright would be like 1.8 million. So if someone purchases directly, if someone goes through the AIC model, over how many years would you take to recognize kind of the same revenue amounts? I understand also the ink and service bundled together, but if you just look at the secret price, how many years will it take to see the same amount recognized over the AIC?
spk11: Yeah, so Tavi, first of all, we are in the early stage of the program, and of course we have a clear modeling and so on. Those type of question, I understand the need for information. We are planning to share by the end of the pilot, sometimes during H2, by then probably the end of Q3, we are planning to do NDR with all of you and to share detail about the model and how do we see it moving forward and the effect on the longer term of our business.
spk02: Okay, so I guess I won't ask this second question, which was in the same kind of granularity. Maybe just more taking a step back. I mean, most of the focus on the call was around Apollo and the AIC, which makes sense. Does that mean you guys have to emphasize the focus on other products or it's just because of the novelty that really most of the prepared remarks were around the Apollo?
spk11: So the Apollo is the new stuff and has a big influence in terms of revenue. And you had just mentioned about the potential of volume that we see from each one of those Apollo. So this is why we decided to focus on this call on the Apollo. Of course, Atlas Max, and as you mentioned, Atlas Max Plus now, we continue to invest in this platform. We see a need, we are playing a portfolio play. Not every customer can commit to the minimum volume that Apollo can generate. There are many small, mid-sized customers that it doesn't have the volume, even in the screen market, that require the Apollo, and they require Atlas Max Plus or multiple Atlas Maxes Plus. And this is why we are playing a portfolio. Of course, I also mentioned Presto, and the Presto Max continue to deliver. We saw this quarter, a really strong growth, strong double-digit growth in terms of supplies on the Presto Max, and our pipeline looks very, very healthy there. We continue to sell both the DTG, the DTF, but also we are starting to sell the dryers, what used to be the Soma. Now we're coming with our own dryers. We passed the data testing. We are receiving very positive feedback, both on the dryers that connected to the Apollo, but also on the standalone drying solutions that will come with the Atlas Max and the Atlas Max Poly. We see a lot of interest also in the sports market. This is another segment that we are focusing, and for these segments, we have developed the Atlas Max Poly, which is an excellent solution, and we see some traction there as
spk13: well. Thank you. Thanks Ronen.
spk10: Thank you. There are no further questions at this time. I would like to turn the call back to Mr. Ronen Samuel, please go ahead.
spk11: Well, thank you very much for your time. Thank you for being here. We appreciate your partnership. We will hope to see you very soon to meet with all of you and we will discuss later on in one discussion. Thank you very much and see you soon.
spk10: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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