Kornit Digital(KRNT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q4 2025 revenues were $58.9 million, with adjusted EBITDA of $5.5 million, both at the upper end of guidance [5][14] - Full year 2025 total revenue was $208.2 million, up 2% year-over-year, driven by AIC program expansion [14][15] - Adjusted EBITDA for the full year was $1.5 million compared to $0.3 million in 2024, indicating a positive trend [16] - Non-GAAP gross margin for Q4 was 50.7%, down from 55.1% in Q4 2024, reflecting changes in product mix and tariffs [15] - Operating cash flow for Q4 was approximately $10.6 million, marking the ninth consecutive quarter of positive cash generation [16] Business Line Data and Key Metrics Changes - AIC revenue grew 104% year-over-year, contributing $15.2 million in revenues for 2025, up from $3.3 million [14][15] - The company exited 2025 with approximately $25 million in ARR from the AIC program, supported by multi-year customer commitments [6][14] - Impressions grew at a strong double-digit rate in Q4, with a full-year growth of 11%, reaching 243 million impressions [5][14] Market Data and Key Metrics Changes - Over 40% of new system deals in 2025 came from net new customers, many transitioning from traditional screen printing to digital production [6][7] - The U.S. market is seeing significant adoption of the Atlas MAX platform among midsize screen printers [7][10] - The company anticipates stronger growth in the footwear and technical apparel segments in 2026, supported by new technologies [11][68] Company Strategy and Development Direction - The company is transitioning towards a more recurring ARR model, which is expected to enhance revenue visibility and scalability [6][11] - Focus remains on penetrating the screen market and expanding the AIC program while delivering on the innovation roadmap [11][12] - The company plans to unveil new technologies at the Connection event in April, aimed at expanding market applications and driving growth [12][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with better visibility and predictability, with 83% of revenues expected to be recurring [11][29] - The company expects low single-digit revenue growth in 2026, with improved profitability and continued positive cash flow [11][18] - Management highlighted the ongoing shift in the apparel industry towards on-demand production and digital solutions as a significant opportunity [56][57] Other Important Information - The company repurchased $27 million in shares under its buyback program, reflecting a commitment to returning value to shareholders [17] - The company is evaluating inorganic growth opportunities that align with its strategic direction [17] Q&A Session Summary Question: Can you provide more details on the peak season performance and Apollo system? - Management noted strong double-digit impression growth during the peak season, with high utilization and customer satisfaction for the Apollo system [22][23] Question: What were the major accomplishments in 2025? - The company successfully transitioned to growth, achieved significant ARR, and penetrated key customers in the screen market [25][26] Question: How should we view the low single-digit revenue forecast for 2026? - Management emphasized a prudent approach to guidance, focusing on long-term quality revenue through the AIC model [36][38] Question: What is the significance of the order from a strategic customer for upgrades? - The order reflects confidence in the technology and will be executed over several quarters, indicating a need for increased capacity [40] Question: How is the Apollo system performing with new customers? - The sales cycle for new customers has been different, requiring more education and workflow integration, but successes are being seen [44][46] Question: What are the expectations for gross margins in 2026? - Management expects gross margins to remain stable as AIC scales, with disciplined expense management [50][51] Question: How does the company view the footwear market opportunity? - The footwear market is seen as a significant opportunity, with innovative solutions being developed to meet customer needs [88][90]