Financial Data and Key Metrics Changes - The company reported second quarter revenues of approximately $49.8 million, which is at the low end of the guidance range of $49 million to $55 million, and represents a modest year-over-year growth of 2% [5][20] - Gross margin was 46.3%, down from 48.6% in the same period last year, primarily due to lower sales of consumables and Atlas Max upgrades [21] - Adjusted EBITDA margin was negative 2.3%, an improvement from negative 3.2% in the same period last year [22] - Annual recurring revenues (ARR) increased by $4 million to approximately $19 million, reflecting progress in building a more predictable business [6][30] Business Line Data and Key Metrics Changes - Service revenues declined year-over-year due to fewer Atlas MAX upgrades, which had contributed significantly to service revenue in the comparable period of 2024 [6][20] - System sales doubled compared to last year, driven by the all-inclusive click (AIC) business model, which continues to drive growth [29][46] - Consumable revenues declined year-over-year, largely due to customers adjusting their inventory levels after a buildup in late 2023 and early 2024 [6][30] Market Data and Key Metrics Changes - The company saw a 5% increase in impressions to 222.7 million on a trailing twelve-month basis, with strong double-digit growth among top customers in both the direct-to-garment (DTG) and roll-to-roll segments [6][13] - The screen printing market is beginning to embrace digital solutions, with significant adoption from new customers globally [11][12] Company Strategy and Development Direction - The company is focused on driving impression growth across its customized design installed base while accelerating penetration into the screen market by transforming analog workflows to digital [7][15] - The AIC model is expected to remain a key driver of growth as both utilization and footprint expand [10][49] - The company is investing in application development, automation, print quality, and ASC offerings designed for longer run production and large-scale operators [14][15] Management's Comments on Operating Environment and Future Outlook - Management noted that while Q2 results were below expectations, there are positive signs in other areas, particularly in system sales and AIC revenue [28] - The company expects modest top-line growth in the second half of the year, with a focus on expanding the ARR base and setting the stage for meaningful growth in 2026 [17][18] - Management is confident in the strategy and ability to deliver on long-term goals, despite potential impacts from tariffs on products originating from Israel [18][19] Other Important Information - The company completed a $100 million accelerated share repurchase program, bringing total repurchases since 2023 to 6.7 million shares for a total consideration of $164.8 million [23][24] - The company is actively managing the impact of a recently announced 15% tariff on products originating from Israel, with mitigation strategies in place [18] Q&A Session Summary Question: Broader commentary on the second half outlook - Management acknowledged softness in Q2 due to lower ink and service revenue but highlighted strong growth in system sales and AIC revenue [28][29] Question: Impact of inventory destocking - Management explained that key customers had increased their safety inventory to about six months, which is now being adjusted back to two to three months [36] Question: Orders for Apollo systems - Management indicated that they are tracking below the target of 30 Apollo systems for 2025 but are encouraged by customer feedback and adoption [40][41] Question: ARR tracking below expectations - Management clarified that while ARR is currently below expectations, they anticipate meaningful growth in 2026 due to a strong pipeline and increasing adoption of the AIC model [52][54] Question: Atlas Max upgrade business - Management confirmed that most of the installed base has been upgraded to Atlas Max, with upgrades expected to contribute to Q3 and Q4 revenues [57] Question: Customer motivation from recent legislation - Management noted that the recent bill passed in North America could influence customer decisions and potentially accelerate deals [68]