Kornit Digital Ltd.

Greetings, and welcome to Corneet Digital's second quarter 2025 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, Investor Relations for Corneet Digital. Mr. Maimon, you may begin.

Thank you, Operator. Good day, everyone, and welcome to Corneet Digital's second quarter 2025 earnings conference call. Joining me today are Chief Executive Officer Ronen Samuel and Lori Hanover, Corneet's Chief Financial Officer. For today's call, Ronen will provide comments on the second quarter of 2025 and provide an update on our market. Lori will then review the second quarter results 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 review the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 20-F, filed with the SEC on March 28th of 2025, 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 Ronen. Ronen?

Good morning and thank you for joining us. We deliver second-quarter revenues of approximately 49.8 million within our guidance range but below the midpoint. Gross margin was .3% and adjusted EBITDA margin came in at negative 2.3%, While service and consumable revenues were softer than expected, system sales and our all-inclusive click business model continue to drive growth. Q2 marked modest -over-year revenue growth of 2%, bringing total first half growth to approximately 5%. During the quarter, we increased our annual recurring revenues by 4 million, reaching approximately 19 million, which is a clear reflection of our progress in building a more predictable and resilient recurring business. Service revenues declined -over-year primarily due to a fewer Atlas Max upgrades, which had contributed meaningfully to service revenue in the comparable period of 2024. While overall consumer sentiments remain relative soft, which continues to affect our customer appetite for new capital investment, we are seeing consistent and encouraging growth in production across our install base. Impression grew 5% to 222.7 million on a trailing 12-month basis, with strong double-digit growth among our top customers in both the DTG and -to-all segments. Despite this increase in impression, Q2 consumable revenues declined -over-year largely due to the lingering impact of October 7 war, which led several key customers to significantly increase ink inventory in late 2023 and early 2024. In the first half of this year, those customers adjusted their inventory approach and began drawing down existing stock, temporarily reducing replenishment activity. We expect this to normalize in the second half of the year. Our strategy remains sharply focused, driving impression growth across our customized design install base, while accelerating our penetration into the screen market by transforming analog workflows to digital and capturing net new impression in bulk apparel. The opportunity ahead is significant, and we are executing with discipline and intent. In the customized design segment, momentum is continuing. These customers, many of whom have partnered with us for years, continue to increase utilization of their systems, translating into higher throughput and stronger productivity. This quarter, we saw clear examples of capacity expansion across our install base. Simpress, a global leader in mass customization, added the second Apollo system, along with three additional Atlas Max Plus units, to their large fleet of Cornet systems, reinforcing both their confidence in our technology and their intent to scale globally. T-Shirt and Sons in the UK, part of PF Concept Group, added the second Apollo as well to their Poland site under AIC, building on their growing Atlas Max fleet. Snugger in the UK added multiple Atlas Max Plus systems to their growing fleet of Atlas Max as a response to strong demand and consistently high performance. Another exciting addition is Flagship Print, a net new digital customer that joined our install base with one Apollo and two Atlas Max Plus systems under the AIC model. On top of that, our global strategic customer placed the follow-on orders to expand their max technology deployment across several sites, further validating the value they see in our platform. While many long-standing customers continue operating under our traditional CAPEX model, new customers are increasingly adopting AIC as a way to align costs with production and scale more efficiently. We expect this model to remain a key driver of growth as both utilization and footprint expand. In parallel, we are making strong progress in the screen printing market, which is a critical pillar of our long-term growth plan. This segment, long dominated by analog, is starting to embrace digital solutions, driven by the need for shorter lead times, labor efficiency, and the ability to profitably handle mid to short run jobs. Our Atlas Max Plus and Apollo systems, especially under the AIC model, are now opening doors to customers who just a year ago would not have considered digital a viable alternative. A standard example is Promos, one of the largest screen printers in the US, serving major brands and national retailers. They installed their first Atlas Max Plus just six months ago, expanded to three, and added an Apollo under AIC in Q2, with more Apollo units now in discussion. We are also seeing strong adoption from new screen customers globally. In the UK, Basic Thinking installed an Apollo under AIC. In Quebec, printies adopted two Atlas Max Poly systems focused on performance sportswear. And T-Shirt Factory in the UK added two Atlas Max Plus units under AIC to replace screen. These are just a few examples of how traditional screen printers are turning to Koneed to modernize their offering and stimulate growth. This rapid expansion and growing confidence from analog players is a powerful validation of our technology, business model, and strategic direction. Looking at production across these accounts, we are seeing a clear increase in net new impressions for bulk apparel. Many jobs now fall within the 250 to 500 unit range, and we are seeing more runs produced well above 1,000 units, which were volumes unreachable for digital before the Apollo and the Atlas Max Plus. The screen market pipeline continues to build, with most deals aligned to the AIC model. Mid-size players are adopting Atlas Max Plus and Atlas Max Poly, while larger customers are deploying Apollo or combining both platforms to address broader range of application and run lengths. Our value proposition is clear. Better total cost of ownership, superior print quality, and unmatched agility. These customers are already seeing measurable improvements in productivity, flexibility, and economics. To accelerate this momentum, we are investing in application development, automation, print quality, and AIC offerings designed for longer run production and large scale operators. While the transformation is underway, adoption in the screen market is progressing at a measured pace. Bulk apparel remain a highly established analog driven segment, and shifting production model takes time. That said, it is far the largest opportunity in front of us, with a massive install base ready for disruption. Cornit is uniquely positioned to lead this shift. We are in the midst of paradigm shift. The strengths of our customer relationship, expanding pipelines, and differentiated technology position Cornit at the forefront of the analog to digital transformation in the screen market. Apollo, Atlas Max Plus, Atlas Max Poly, and our AIC model together create a powerful foundation for long term disruption and market leadership. We also made meaningful progress this quarter in expanding into new verticals, with additional systems being installed at key footwear customer across China, Vietnam, and Europe. Each of these customers is adopting Cornit's technology to meet the specific demands of mass market spot footwear production, which demonstrate the scalability and adaptability of our technology across region and use cases. In parallel, we are advancing breakthrough innovations for functional applications and plan to unveil new capabilities later this year that will open entirely new high value markets where Cornit has not previously participated. We also signed a strategic development agreement with one of the world's top sports brands to co-develop a proprietary application leveraging our unique functional technology. While details remain confidential for now, this partnership highlights the increasing relevance of our technology for global brands looking to innovate, design, and deliver with speed, sustainability, and agility at the core. Looking ahead to the second half of the year, we expect modest top line growth of low single digit while further expanding our ARR base and setting the stage for meaningful growth in 2026. We are executing against a defined plan, scaling Apollo, accelerating AIC adoption, strengthening our screen market funnel, and maximizing utilization across global install base. At the same time, we are maintaining tight operational discipline, continuing to target fully adjusted EBITDA profitability and positive cash flow from operations. In addition, we actively managing potential impact from the recently announced 15% tariff on products originating from Israel. While we do not expect a material effect on our financials, we have developed mitigation strategies and cost saving initiatives to minimize any impact. In closing, we remain confident in our strategy and our ability to deliver on our long term goals. We are in the midst of a profound transformation. On demand sustainable digital production is no longer a future vision. It is happening now. Our value proposition is clear. Our strategy is aligned with long term industry trends, and we have intense focus on execution. While this change takes time, we are building a healthier, more resilient and more scalable business with the right technology, the right model and the right team in place. Thank you for your continued support. Now we'll turn the call over to Laurie. Laurie.