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Kornit Digital(KRNT) - 2024 Q4 - Earnings Call Transcript
KRNTKornit Digital(KRNT)2025-02-12 17:15
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Financial Data and Key Metrics Changes - Q4 2024 revenues were reported at 60.7million,reflectingayear−over−yeargrowthof760.7 million, reflecting a year-over-year growth of 7% driven by system sales and revenue from the AIC model [21][24] - For the full year 2024, revenues totaled 203.8 million, down from 219.8millionin2023,primarilyduetolowersystemsandservicessales,partiallyoffsetbygrowthinconsumables[21][22]−Non−GAAPgrossmarginforQ4was55.1219.8 million in 2023, primarily due to lower systems and services sales, partially offset by growth in consumables [21][22] - Non-GAAP gross margin for Q4 was 55.1%, up from 48.6% in the same period last year, while the full year gross margin improved to 48.6% from 38.4% in 2023 [22][25] - Adjusted EBITDA for Q4 was 8.4 million, significantly up from 0.2millioninthesameperiodlastyear,withamarginof13.80.2 million in the same period last year, with a margin of 13.8% compared to 0.3% [24][25] - Operating cash flow for Q4 increased to 26.7 million from 2.6millionyear−over−year,withfullyearcashflowat2.6 million year-over-year, with full year cash flow at 48.7 million compared to negative 34.7millionin2023[26]BusinessLineDataandKeyMetricsChanges−TheApolloplatformwashighlightedasakeydriverofperformance,with15systemsdeliveredin2024,contributingtomass−scaledigitalproduction[10][12]−ThecompanysuccessfullytransitionedcustomersfromAtlastoAtlasMAXandisnowupgradingtoAtlasMAXPlus,indicatingstrongadoptionofnewtechnology[13]−TheAICmodelisdrivingstrongadoptionandgeneratingmeaningfulannualrecurringrevenue(ARR),whichwillbereportedstartingQ12025[13][30]MarketDataandKeyMetricsChanges−Kornitexpandedintonewmarketssuchasbulkapparel,footwear,andhomedecor,withsignificantstepstakeninthefootwearsector,includingdeliveriestomajorcustomersinAsia[14][15]−Thecompanynotedashifttowardson−demandmanufacturingamongbrandsandretailers,whichiscriticalforrespondingtoconsumerdemandwhileminimizingexcessinventory[17][18]CompanyStrategyandDevelopmentDirection−Kornitaimstobuildaresilientandprofitablebusiness,focusingonexecutionin2025totranslatethefoundationlaidin2024intoscalablegrowth[19][20]−Thecompanyisemphasizingcustomersuccess,accountmanagement,andrecurringrevenuegrowth,withastrongfocusoninnovationanddisciplinedfinancialmanagement[15][20]−Kornitplanstodeliver30Apollosystemsin2025,doublingthenumberdeliveredin2024,indicatingconfidenceindemandandmarketpotential[39][95]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismabout2025,citingastrongpipelineandvisibilityforrevenuegrowth,particularlyfromtheApolloandAICmodels[46][47]−However,theyacknowledgedmacroeconomicuncertainties,includingpotentialtariffsandinflationarypressuresthatcouldimpactconsumerpurchasingpower[18][19]−Thecompanyiscloselymonitoringcustomerbehaviorinlightofgeopoliticaldevelopmentsandpotentialtariffs,witha"waitandsee"approachfromcustomers[76][78]OtherImportantInformation−Kornitexecuted34.7 million in 2023 [26] Business Line Data and Key Metrics Changes - The Apollo platform was highlighted as a key driver of performance, with 15 systems delivered in 2024, contributing to mass-scale digital production [10][12] - The company successfully transitioned customers from Atlas to Atlas MAX and is now upgrading to Atlas MAX Plus, indicating strong adoption of new technology [13] - The AIC model is driving strong adoption and generating meaningful annual recurring revenue (ARR), which will be reported starting Q1 2025 [13][30] Market Data and Key Metrics Changes - Kornit expanded into new markets such as bulk apparel, footwear, and home decor, with significant steps taken in the footwear sector, including deliveries to major customers in Asia [14][15] - The company noted a shift towards on-demand manufacturing among brands and retailers, which is critical for responding to consumer demand while minimizing excess inventory [17][18] Company Strategy and Development Direction - Kornit aims to build a resilient and profitable business, focusing on execution in 2025 to translate the foundation laid in 2024 into scalable growth [19][20] - The company is emphasizing customer success, account management, and recurring revenue growth, with a strong focus on innovation and disciplined financial management [15][20] - Kornit plans to deliver 30 Apollo systems in 2025, doubling the number delivered in 2024, indicating confidence in demand and market potential [39][95] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2025, citing a strong pipeline and visibility for revenue growth, particularly from the Apollo and AIC models [46][47] - However, they acknowledged macroeconomic uncertainties, including potential tariffs and inflationary pressures that could impact consumer purchasing power [18][19] - The company is closely monitoring customer behavior in light of geopolitical developments and potential tariffs, with a "wait and see" approach from customers [76][78] Other Important Information - Kornit executed 75 million of its $100 million share repurchase program, with plans to complete the remaining amount by mid-2025 [16][27] - The company is focused on improving gross margins and expects a moderate improvement in 2025 compared to 2024 [92][93] Q&A Session Summary Question: Goals for 2025 and top line growth potential - Management highlighted 2024 as a transformative year with clear targets set for positive EBITDA and substantial cash generation, with a focus on execution in 2025 [35][38] Question: Roll-to-roll opportunity in 2025 - Management noted improvements in the roll-to-roll market due to new product releases and increased demand from customers, indicating optimism for 2025 [50][57] Question: Performance of Apollo during the holiday season - Apollo systems exceeded expectations during the peak season, with high customer satisfaction and plans for additional orders [60][64] Question: Equipment purchases or upgrades from strategic accounts - Management confirmed ongoing upgrades from key customers, including Printful, and expressed satisfaction with the performance of upgraded systems [70][72] Question: Gross margins in Q1 - Management indicated that Q1 is typically the lowest gross margin quarter due to seasonality, but improvements in cost efficiency are expected [75][82] Question: Customer behavior regarding tariffs - Customers are uncertain about potential tariffs and are adopting a "wait and see" approach, with some considering moving operations onshore [76][78] Question: Number of customers for Apollo systems in 2025 - Management indicated a mix of existing and new customers for the 30 Apollo systems planned for 2025, with a balanced approach to installations [99][101]