Kornit Digital Ltd. (KRNT) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Kornit Digital's 2024 Investor Event. It's been 3 years since we've been at one of these. We're excited to have all you guys. We hope you're excited to be here. Quickly before we get started, I know you're all going to be distraught, but I'm not going to read our entire safe harbor. I do ask you to familiarize yourselves with it. I think we've got a great day for you all planned today. We're going to get started with a presentation from Ronen and Lauri for about 1.5 hours, it will be about fashion choosing on demand. And then we'll take a quick break before we come back for customer panels. We'll do 2 customer panels with some of our key customers, key accounts before going to lunch. And then we'll come back with a couple of innovation panels before closing with Q&A. And then for those of you that are here in person, we'll head over to the Printing United show floor to see the Atlas family of systems as well as the Apollo, which is here in person on the show floor before heading to the VIP event tonight with customers, investors and the management team. Thank you all for being here. And at this point, I'd like to introduce Kornit's Chief Executive Officer, Ronen Samuel. Ronen?

Thank you, Jared. Thank you, everyone. Wow, I'm excited. Thanks for coming. Good morning. We have many people also on the webcast. People that's sitting all over the world. So for some of them, it's evening, some of the middle of the night. Welcome our investor community and analyst community, customers that's sitting here, sitting on the webcast. We have many of our employees on the webcast as well. We are really, really excited to help them on this call, on this meeting. And we have partners. Today is going to be an exciting day. You are going to hear a lot from Lauri and myself about our strategy, about the market about our technology and execution and also road map of where we are taking our technology, but also how do we see the financial road map ahead. So on top of that, you will see many of our customers. This will be the most important part of the day. You will hear partners and customers that are dealing with our technologies. If it's demand generation or fulfillers that's using our technology. And we're also going to talk about the future, new technologies that we are bringing and new capabilities. So it's going to be an exciting day. And I hope that all of you are ready. So what's going to be today. So let's talk about the vision. So our vision actually didn't change for the last 2 decades. We're all here to help the fashion and the textile industry to move and to become relevant, to move to a sustainable way of production and doing it, they need to choose on demand. And we are going to show you that actually the market is choosing on demand. As I mentioned, Kornit is celebrating something like 21 years. From the beginning, we are focusing on their On-Demand. But we are focusing on one specific market, a market that we call customized design, a market that we enable the creation of this market. We enable the growth, and we were a market leader and we're still market leader and we see this market continue to grow, but it's a small niche of the overall textile and fashion industry. In the last few years, we worked day and night to bring our technology to enable most retailers, brands to really leverage the technology to enable them to move to On-Demand. And what I hope is we can prove you today that the market of the brands and retailers are really moving into On-Demand. You're going to hear it from our customers. You're going to hear from some brands and retailers here. The market is really moving On-Demand. We are going to talk about really conversion of the market between -- conversion between the market. The market is ready to move to On-Demand. The technology is now maturing with the MAX technology, with the Apollo and the execution plan, including the all-inclusive clicks that we introduced a few months back, and now it's growing everywhere, and we are going to talk about it later on today. It's really converging everything together to help the market to accelerate and the growth. And I can tell you today, we see the growth. You will hear it from our customers, and you will feel it as well. I would like to actually start with the market. And as I mentioned, the market moving to On-Demand. What the market really needs is agility. They need the creativity. They need to be relevant. To do that, they have to move to On-Demand. There's no better way to start with a short video clip to explain us about the market and then we'll continue. [Presentation]

So it's great to establish this video because I think it sends a very clear message. Where is the market today and what the market needs. And the market needs the agility and the agility that provide them speed to be fast to the market, to be flexible to produce anything they would like, to be creative; and of course, on top of that to be sustainable. This market, as you know, is one of the most polluted industry in the world, and we have to move it sustainable, but also sustainability in terms of the business model. The business model of the brands and retailers that we are going to talk later on today needs a change and needs to be a long-term sustainable business. Let's talk a bit about the consumer today. And today, consumers totally different from 10 years ago, think about 10 years ago. We all have -- many of us as kids, young kids, generation Z, millennial, they're spending most of their time online, virtual world all around them. Actually, average person is spending about 6 to 7 hours a day online. And those kids, TikTok, Instagram, et cetera, they're getting all the requirements and all the new demands and all the direction from the influencers and the influencers really defining what they're going to wear the next day or the next week. And comparing it to 10 years ago, which was the magazine. People were reading magazine and we're looking like what will be the fashion 12 months from now. Totally changed. Fashion is changing every minute, and trends are changing every minute. Actually, we have about -- when you look at the consumers today, the immediate gratification is super important for them and they are willing to pay even more -- 88% of them are willing to pay even more for a product that will be delivered the same day or the next day. And when you look at it, and you ask yourself what's going on in the market. Take, for example, [indiscernible] is a great example that producing something like 720,000 new SKUs every year. So they have managed to really change the supply chain to move on demand and really track the trends in the marketplace. Today, the consumer, they would like to be to express themselves, the young generation. And they would like to be part of a tribe. And they will buy from brands and retailers that they feel that they can connect into like a tribe. But when you look today on brands and retailers, most of them are still working in a very legacy way. They build their supply chains hundreds of years ago, a supply chain that is built on offshore producing large quantities in China, in Bangladesh, shipping them all the way to the U.S., to Europe, trying to focus what the consumer, what we're going to wear a year from now. Guys, this is impossible. It's impossible to forecast because the trends today are changing by the minute. And what can you do with it? Think about it [indiscernible] is still using 4 seasons, maybe 8 seasons and trying to forecast what does it create? It creates massive inventory. And inventory is one of the biggest issues of the brands and retailers and one of the biggest issues in sustainability of this industry. And here, you can see drafts and studies that was done by BCG. And they're saying this is one of the biggest issue of the textile and fashion industry. This issue is a $1 trillion issue that can be solved, $1 trillion issue. If we can manage to reduce inventory and produce what is needed to the consumer on demand. You can see also on the right side on the graph, there is a clear correlation between companies that are managing short cycle of inventory and lower inventory. There is a clear correlation also to profitability. And we have one way to help brands, retailers to be more profitable and to solve the issues of this inventory, $1 trillion of waste or overspending on inventory, and this is by moving into production of On-Demand reacting to the trends that consumers need. McKinsey did a report and they are publishing every day, every week, every -- sorry, every year a report about the industry, the fashion industry, very interesting report to read. And they're interviewing many executives. And this is part of their conclusion about interviewing hundreds of executive in the industry and they're asking them about the supply chain. What are you going to do in solving the inventory in the supply chain. And the reaction are very, very clear. 39% of them are saying, we are moving into On-Demand production. Guys, we see it. We see the industry is moving to On-Demand production. Many of them are saying, we are really moving to onshore or near-shore production to be closer to the consumer, to react faster to the new trends, building partnerships. You will hear today from a very important customer of us, from Zumiez, of not only building the partnership between us to enable them to really move into On-Demand and to be relevant and to really address what the consumer needs, but also you will hear about moving vertically. We see more and more brands, retailers, they decided to move vertically which they never did. In the past, they were producing outside and now they're moving production in-house, some of them, really in order to react fast to the market and to become and to be relevant. So what is the solution? We are talking a lot about On-Demand and what is the On-Demand providing them? It's really about minimal inventory. You really produce what is needed, where is needed, when you need it. You don't need to forecast 1 year ahead of time. So this is the On-Demand production. You can really produce short runs and you can actually unleashing the creativity because now you can try something, train short run, produce short run, test it in the market, see the reaction and then continue to produce the same day or the next day. The next thing is about really being relevant. You can see today, you're going to many shops out there, retailers, and you feel that not all of them are relevant. They're trying to sell us goods that was relevant a year ago, but they have an inventory. And trends are changing by the minutes. To be relevant, really needs to move into On-Demand and to move to onshore or near-shore production and another great example of nearshore production that you will hear later on is from our TSC. On top of all of this, there are major changes that's happening in the industry. There's a lot of focus on sustainability. I mentioned before, this industry is one of the most polluting industry in the world, not only in terms of really waste, but also in terms of emission and pollution of water. And this is one of the biggest opportunity that we can fix. And in the survey that McKinsey did with top executives, 87% of them believe that legislation regulation will force the brand to change, to change the supply chain, to move into more sustainable way of production. There's another big trend that's happening is really trade tariff. And you can see it all around us in the world. What was important here in the U.S. specifically, you can see it that for the first time, fashion and goods are being produced more in Mexico than in China. And we have another example here. I mentioned before TSC, we will sit here. Scott, and Scott is really, really growing very nicely, producing mostly in Mexico but for the U.S. market. And these trends, we see it with many of our customers across U.S., but also in Europe and Asia. To solve the issue of sustainability, there is one way to do it. It's moving to Pigment, and Kornit is the best solution to solve it. By using Kornit technology, actually, you are going to save 95% of the water. Actually, our machine doesn't use water. The water that's being used is the water that our employees are drinking. This is being calculated into it, 95%. So it's on the printing side, it's 0%. There is no water consumption. We'll talk later on about the consumption and the pollution being generated by analog. Emission. We are going to reduce the emission by 83%, energy efficiency by 94%. Our Inks are certified with the highest certifications that needed in the industry. And on top of that, moving On-Demand, you're actually going to save, something like 30% of overproduction. So to sum it up, Kornit really offer the agility that market needs. We offer the speed that they need, the flexibility, the creativity and on top of that, sustainability to make this industry sustainable and to make their business sustainable moving forward. Let's talk a bit about the technology. We are very, very proud of our technology. And I'm going to give you some more details what's going on with Apollo, with the MAX, which is the roll-to-roll solutions. But let's start with a short video. [Presentation]

Good. So from inception of Kornit, we are focusing on Pigment, Pigment Inc. With our unique process, we brought the technology to a level that really meets all the standards of the industry in terms of durability, in terms of hand fill, in terms of the look and feel of the garments, on the range of garments we can print on, we are going to talk about them in a minute and you're going to see it. Let's start with our DTG, direct-to-government, which we remember, I mentioned in the beginning that in the last 20 years, we were really focusing on customized design. And we were leading with our technology in the customized design. What customized design needed is really being able to print very, very short run, one-offs, in good quality. But this quality was not good enough for brands and retailers because brands and retailers need all the garments to look the same. They need different level of quality. And for the last few years, we were working hard day and night to bring the MAX technology. And in 2021, we introduced, for the first time, MAX technology. We took the Atlas into the MAX, and we brought the technology to a retail quality. And for the first time, we start to see that we are actually being adopted, our technology is being adopted by retailers, brands, but also fulfillers that, of course, working and supporting and fulfilling for brands and retailers. And you will hear today, many of you were asking in the past, we want to hear more about brands. Are you printing for the biggest brands? Please ask the customers that we sit here. They're all printing for massive brands, brands that you all know but also for many, many midsized brands. They're using our technology, really the MAX technology, which MAX also opened the polyester market, the sports market, which I'm going to talk about it in a minute. Last year, we started the beta of the MAX, Atlas MAX Plus with the Apollo. And we are going to talk about the Apollo because it's a game changer. And there, we really started to get into mass production. And our technology, the MAX Plus and the Apollo is now being adopted by major, major big screen printers that never thought about moving to the digital. They have been forced to move to digital because a lot of their jobs are moving short-term and they were looking for solutions and the solution was not there in terms of quality, in terms of productivity, in terms of total cost of ownership. What the Apollo and the MAX Plus bought exactly that. Quality, productivity, total cost of ownership that meets the needs of the fulfiller, meets the needs of the brand and, of course, the consumer. The MAX technology, what is providing us for the first time? Really, we're always targeting to go after this market. For the first time, we can say we have the retail quality. Actually, our quality in many aspects is better than the screen. If you take any photographic image, you want to put it, not only the view how it looks, cost, time to market, much, much easier to do it with MAX technology, in the highest quality. Productivity, having solutions like the Apollo with 400 T-shirts an hour with Atlas MAX Plus, that come into 150 T-shirts an hour. Apollo with one operator, we are going to discuss it later on, but this is a breakthrough for this industry. And manpower, labor is a massive pain for this industry. And you will see a lot of focus of industries moving to how we can produce with less labor and Apollo is the solution. Unlimited creativity. What I'm wearing here, you can see XDI. I'll show you 2 examples of unlimited creativity. This is a hoodie or sweatshirt. You can see here this is with XDI, 3D dimensions, yes, printing on a garment. Guys, it's almost impossible to do it with any other technology. It will be -- if you try to do it, it will be very, very costly. Another part, another example to show you capability of our technology, this is actually printing on polyester. But look at it, look at the K and look when I'm turning. What happened to the K? Changing the color, right? Using kind of lenticular effect with our inks and you have to touch it to fill the hand feel of it. This is innovation. This is unlimited creativity that we can bring with MAX technology. And of course, as I mentioned, sustainability. The MAX technology is taking the sustainability to the next level, the MAX Plus even to the next level in terms of sustainability. It's opened for us -- the MAX technology opening for us, new markets. We were always being in the customized design, but really going after screen, replacing screen, heat transfer. I'll show you type of embroidery capability. This one, really amazing what you can do with it and really getting into new markets, which I want to show you here. This is a sports professional T-shirt for athleisure market. Look with what you can do? This is including XDI. It's a kind of heat transfer effect but using, of course, MAX technology, and you can take it for athleisure, professional sports and many, many other applications, you will see later on, both on our booths and hear some interesting application. And of course, getting into the brand and retailer needs, the highest quality, the highest durability and consistency of print. This is super, super important. Let's talk about the game changer. Apollo is a game changer. We started the beta testing around October last year, very successful with 3 beta customers. You will hear from all 3 of them today. Some of them will be on a panel, some of them waiting for you on the booth. You can ask them any questions. You will hear some news, interesting news from them, about scaling up, about the Apollo. And the Apollo, as I mentioned, is a game changer because it's a factory. It's a factory by itself. It can produce 400 T-shirts an hour. Every T-shirt can be different if you would like, or you can run it long runs. And actually, we have customers that's using Apollo for a run length of 1,000 and even more. What we are saying that every job or in general, most of the jobs of 500 and below are better, more cost-effective to run on the Apollo than any other technology out there, mainly if you're using multiple colors. And we start to see the growth of the Apollo. You remember, I mentioned that this year, we are going to install 15 systems. So I now want to confirm that we got all the orders for those 15 systems for this year. We actually got much more demand for this year. And those machines are being installed and we are going to deliver all those 15 systems to our customer before peak season that they needed for the peak season. I also mentioned to you that next year, we are planning to install and deliver 30 systems. I'm happy to tell you we are standing here today, and we already have a commitment and orders of more than 15 systems, more than half of what we told you that for next year, we need to deliver, we already have it in hand. And this is even before the show starts. Guys, the industry understands this is a game changer. This is really a replacement for the screen market for mid runs. Of course, you can do short runs, you can do one-off for mid runs. We are very, very proud of this technology and it's just the beginning. What you can see here? All the time we were talking about what is the run lengths that you can capture in, how many colors you need to put on a screen machine versus what are the run length. And you can see that the Apollo is opening a massive opportunities. And if you are running really multiple screen is much cheaper to run the Apollo. And as I mentioned, every job below 500, it probably will be cheaper to run the Apollo on top of being -- delivering it much faster to the market and much reduced labor. One labor versus a [indiscernible] that need at least 2 people and 4 people that are preparing the plates, the screens. Let's talk about the market and how do we define the market, but I would like to take you one step back. Before we are talking about the screen market, let's remind ourselves. Kornit for the last 20 years, we're focusing on customized design. This market is something like 1.1 billion impressions. This is the market size that we went after, and we were the market leader there. We capture many of those impressions, an impression is very, very important to remember. From now on, we will talk a lot about the impressions. And you will hear from Lauri later on, we are going to start reporting on impressions and the growth on impressions. With the MAX technology, we opened for us a massive market. Now what we are saying here, you can see 4.8 billion impressions from the screen market. Those are impressions that are below 500. We didn't count here impression above 500. And as I mentioned, we have today customers, and you will hear them on the panel that using the Apollo on much longer than 500 copies. We were trying to be conservative and saying this is the market that we are going after. And we actually -- the market that we are going to address now is 4x bigger than the market that we had before. And this market is growing by 10%. And in 2028, this market is going to be 8.6 billion impressions, a massive market that we are going after to capture a market share there. Another important point that I wanted to share with you. You're all asking me, "Boss, what is -- how many players in the screen market?" Guys, before we didn't play the screen. Our customers, our digital players, some of them you all know, very familiar companies, brands, but in the screen market, there are about 25,000 screen printers, and we segmented them. We looked at each one of them and try to segment who are relevant for us. And actually, we said we need to go after the medium and big size. And the medium and big size, they are about 7,000 all around the world of mid- and big size, large-sized screen printers. But 7,000 is a big, big number. And actually, from execution plan, and we'll talk later on in execution in details. We are now targeting the Top 500. And I can tell you, most of those 500 are totally new customers, and you will hear today from some of our new customers that are joining for the first time to the digital world, leveraging MAX technology and specifically Apollo. I would like to mention 2, very interesting. Deformation. Deformation will be here with us on the panel. So I don't want to speak too much about them. You will hear a lot about them. And Print Palace, which is a midsized screen printer in Europe, in Germany. We're looking at digital for many, many years. Its main job is really printing from concept, all over Europe. And it's printing quite long run for concept. But he need to react very fast to the market. He was looking for digital, but he said all the time, digital still not there. Once he saw the MAX and the Apollo, and he came and really worked on the machine in our demo centers in Europe, and said, that's it. This is the quality we need. This is the productivity that we need. But above that, he said, "Wow, you are going to solve me a big issue of labor. I'm actually going to reduce, and he had something like 30 people, to reduce major part of it because Apollo can replace many of those screen machines with one operator." What are the differences between the Deformation to Print Palace. It's important. Print Palace is totally new, totally new screen printers that we is first-time buying digital, first-time Kornit partner, for a Kornit customer. Deformation is existing customer. You would hear. For many, many years, they're using Avalanche. They're using Avalanche for really, really short run for one off, but their main business is screen. It's a big screen printer, really big screen printer, but we never discussed with them about how can we help them to convert and move the screen jobs and make it more efficient. And for the first time, now we have an opportunity to go to many of our installed base and really help them to transform the business and move jobs from screen into digital. And this is a great example that you will hear later on. Let's move to our roll-to-roll to the Presto technology. And there as well, we have a history. We have a history that in the beginning, we actually introduced our LEGO and later on, the Presto. It's more for the enablement of those that wanted to do unique application, one-off, connecting through the web to consumer, B2B2C, B2C. What we see today with the introduction of the MAX technology is really getting into the mainstream and into the replacement market. And there, there is a different play, a much bigger play. But before that, the MAX technology really taking it to a different level of quality, both in terms of durability that is very, very important for this market, the roll-to-roll, the hand feel that important to this market, the capability of doing XDI. We are the only company that enable XDI also on the roll-to-roll. We are the only company that enables to print Whiting with Pigment on roll-to-roll. We are the only one that you can do print on dark fabric, leveraging of course, the Whiting as well, neon colors, opening tons of opportunities for our customers. And with the Presto, MAX Fashion, we're taking it to the next level with [ Arvivido Ink ], the black is even more darker, the durability is better, et cetera. And when you're looking ahead, where we are taking it and you will hear today, you will hear about 2 new segments. They are actually more segments that we are looking into. But you will hear today about Home Decor and you will hear about Footwear. Look at this sofa, this sofa. Later on come, sit on it. It all was printed on Kornit technology. It's really unbelievable using the Whiting, using the XDIs. And of course, we will get also to other markets like the technical market. Here, you can see the range of what this technology can do. With the Pigment ink, the main advantage, you actually can print almost on any type of fabric. This is an example of a fabric that we are printing on, leveraging our technology, this is XDI with [indiscernible], but printing on wool, which is very difficult. Later on, look at it and touch it. The advantage of Kornit technology, the roll-to-roll technology is really a different play versus the DTG. It's all about sustainability. It's all about being able to produce what you want, when you want and the quantity you want. Today, the market is using [ Dyebase ]. The [ Dyebase ] is think about reactive ink, even using digital reactive. And you can print digitally active immediately, and it's mainly on cotton. For every fabric, you need a different [ Dyebase ] technology. But then there are multiple processes. You need to pretreat, you need to print and then you need to steam and you need to wash and it's long cycles and it's polluting and using a lot of water and creating a lot of waste. And you need to plan ahead of time. You cannot produce from today to tomorrow. No way with reactive ink. And this is an evolution that we are bringing to the market, and we start to see and you will hear it also today from one of our customers, very innovative customer that taking it vertically and really producing not only printing, but really producing the [indiscernible] very high fashion -- high-value fashion into the market. So we are taking it to many different capabilities, different applications. One of the markets that you're going to hear later on is about the Home Decor. This is a new market that we are opening now and Pigment has major advantages entering into this market, and you will see this example here and later on in our boost as well. The Presto, Presto MAX and Presto MAX Fashion right now is the latest technology. And what we see today is that the type of customers that are buying it, some of them are traditional manufacturing, really running long runs for the major brands, leveraging some of them digital technology, but using [ Dyebase Reactive Ink ] which require a lot of processes and is being used only for long runs. With our technology, they really react fast to the market and produce anything they want in any quantities. This is one time, but we also see more customers moving vertically and producing -- not only printing but producing the garments and selling it to the retail shops or online. Let's talk a bit about the market, the size of this market. The size of this market, as you can see, is something like 2.8 billion. Why did we decide to go after 2.8 billion -- 2.8 billion square meter. Those are the square meters that today are being run on digital devices which really runs on reactive ink -- in general, mostly reactive. Meaning you can print digital, but you have to go through the processes of washing and steaming and all those things. It's not sustainable. We are targeting this market. This market is growing by about 10%, but also we are enlarging the new application like Home Decor technical market, footwear, you're going to hear today about the footwear opportunity, which is a massive opportunity which we are taking the roll-to-roll solution, and we are enlarging our [ SAM ] that we are going after. And the whole idea is to replace the digital solution out there with a sustainable digital solution, which is pigment, and we have, by far, best pigment ink for this market. Another point I want to mention to you, the size of the market, how many players, this is a massive market. There are about 12,000 -- 12,500 fulfillers, players there in the market. We identified the top 4,000 of them that in medium and large size that we are targeting them, and within them, we prioritize the top 700 that we have a very clear plan to execute and to go and really making them more sustainable and more relevant. You will hear today from 2 customers. And I'm putting those 2 customers because we have many, many more examples, but putting them because each of them is totally different market. Sutex which you will meet them on a booth today, and they will present the Presto, and what they're doing, they are really running long runs. They're based in Colombia, producing mass quantities, A lot of it's going to the U.S. and other parts. And you will hear what they're doing with the Presto. And you will hear about really replacement play. Pixartprinting, they will be here on the panel. They will introduce themselves. Amazing story, amazing company, part of the Cimpress group. But they -- Cimpress, they're known about on-demand printing. They came from the commercial space, printing on paper, on plastics, et cetera. They found the opportunity to do it for fashion. And they are very innovative customer and they develop a totally new brands, which they are going to expose to you and share with you in doing one garment at a time, high fashion, one garment at a time, amazing story, totally 2 different types of customers in different geographies as well. So when we're looking at our technology and our portfolio, we have a very wide range of solutions. You will see most of them on our booth today here at PRINTING United. And start with the ink, which is by far, the best pigment ink in the market, this is where Kornit is really excelling, and we are taking it to the different application with the White Ink, with the Neon, with the XDIs. The large variety of products that we have really system from the Apollo that we have discussed to the Presto, to the Atlas, to the Atlas Poly, really being able to print on polyester, to really getting into the smart production, bringing new capability like smart dryers that really connect to the machine if it's connecting physically or offline, but the machine is talking to the dryers in order to reduce the energy and to be -- to bring the quality to a perfection. We also build somewhat called QualiSet. The idea of the QualiSet is that we would like that every system when you're coming in the morning and you're starting to run it, that you will be in a perfect position. And all systems will be in the same quality level, no matter if it's between systems, it's between sites in order to enable your on-demand, no matter where you need to have the same quality. We are putting a lot of focus on data. You will see a lot of investment coming on data. And data is important for the XDI, it's also the all-inclusive ink that we will talk later on, but data is more important to our customers. They would like to know what was the production, what was -- how was the shift looks like? You will hear from our customers today, how they use the data for their benefit and for to understand the cost of production. Also, this data will provide them when the machine is up and down, will be -- now we are much more proactive, and we are taking the data few steps further leveraging the AI and we're going to touch on it later on as well. KornitX, the whole idea of KornitX is to enable the market to move to on-demand, to connect digital platform out there, to do on-demand anywhere around the world. And we start to see nice adoption of this concept. Today, you are going to hear from one of our partners that leveraging KornitX, [ Gelato], he would be on the panel, and you will hear from him the benefit of really leveraging the on-demand production anywhere around the world in the same day production, in a consistent quality that KornitX is providing to the market. We are very proud of the awards that our technology is getting every year when we are coming with new innovation. We are getting those awards. Kornit is all about innovation. So let's talk about a bit about innovation moving forward. And I would like to expose 3 areas of innovation that we are working on. One is about application. Kornit today in terms of application has the widest range and tons of innovation to XDI's, the whiting, printing on polyester, the quality. But really, what we would like to take in terms of application. First of all, we are aiming to be agnostic, fully agnostic to print on any fabric, without the need to do a setup, without setting. We really took -- take a fabric to print on it without difference. So this is the next step that we are working. But we are working also on applications that will provide functionalities and specialty application, think about special inks, for example, metallic inks and other stuff that I cannot expose right now, but those are things that we are working right now in the labs, and they will come in the future. Second thing is automation. I spoke about labor. Labor is one of the most important things in the industries, the pain point in the industry is very, very difficult today to raise the labor, to keep them. You will hear the story from our customers, the pain that they have about the labors. And we bought Apollo, and Apollo is a breakthrough, one operator at 400 T-shirt an hour like a factory, but we would like to take it to the next level. To take it to the next level is about running the Apollo without an operator. You will see it coming. But we would like to take it to the next level. And the next level is not only about Apollo. It's about the entire production facility, and we would like to take it to light out, really light out without operator. This is where Kornit is heading. It will take a few years, but we will be there. Another thing is about data. And data is super, super important. You will see, and I mentioned it, we will work more and more on data. Data is important for us to understand what our customers are doing, how we can be more proactive to support them, to grow, but also definitely for our customers to understand what they are doing. You will see the connect umbrella, bringing more technologies. And you will see the use of AI in our technology. What I would like to do now, and you know that we have panel later on, you will hear from our customer. I would like to give you a glimpse from a few of our customers that's not here today, and they will share with you a bit about their experience on our technology. [Presentation]

Good. As I mentioned, you will hear much more later on from our customers here, but also on the booth later on. Let's talk about our execution plan and our go-to-market plans. And I think this is super, super important. We have a very focused execution in front of us, really how to go, what are we doing with our installed base, what are we doing with the new markets we are going after and we're going to share with you. So we are going after high-value impressions. I mentioned impression is very, very important. On one hand, there are 3 areas that we are working. One is really strengthening our core. Our core is where our customers today, many of them with customized design, but many of them are doing customized design and also screen. We will talk about the core. We talk about how do we broaden our foundation to new markets that are entering like the screen market. And we will talk about building new -- or building into new adjacencies like the footwear and home decor. So let's start with existing customers. Guys, we have something like 1,100 customers today. Some of them very, very big, some of them small and they need our help. We see 2 main opportunities with the existing. We're actually going one by one right now and looking at the opportunity to help them to grow. Some of them are using legacy technology. Avalanche's and even older technology than that. And in order for them to compete to be relevant, we are coming to help them to move into the MAX technology. They need MAX technology. This is one opportunity we're looking on those customers that have multiple Avalanches, multiple Storm that they have enough volume in to -- to move into MAX. The second big opportunity that I mentioned before is that some of our customers today are doing customized design and one-off leveraging, one Storm, 2 Storm or Avalanches or even Atlas, Atlas MAX, they have a fleet of streams. But there -- this is their main business, the screen. And now we are going and coming to them and helping them to move and to be efficient to move jobs from screen into Apollo or the MAX technology. So this is one area of focus on the existing. On the new. In the new, it's really about mainly the screen market. We were talking about those 500 that we are now focused. We have the names. We are going region by region. Meeting those screen printers, and I can tell you, some of this discussion is progressing very quickly. They see the technology, they have massive pain about delivering first to the market, about delivering short runs you are meeting screen printers and you don't believe you're asking what is the average run length that you have. Many of them will tell you less than 200. How can you do it with screen? It's just unbelievable the amount of labor and cost and we really can save money from the first day moving to digital. So this is a major focus for us. Second focus on broadening our opportunity is really going after the demand. We have built a team that really going after brands, after retailers, after demand generators, explaining them how they can become relevant. Many of them need the help to understand that we can actually produce on demand. They actually can produce short runs. They actually can have the quality that they dreamed of, and this is a major focus. And today, you're going to hear from one of this demand generator that really moving a lot of the volume into Kornit. In terms of the adjacencies, the best thing to do is to leave it later on to the panels, to hear about the footwear opportunity, massive opportunities, we will touch also the fabrics that we are printing on and you will see the capability and of course, on the home decor. What we are doing in terms of the organization. We're actually changing the DNA of the organization. We're changing the DNA of Kornit. Kornit was focusing on customized design, of one of -- now it's about longer runs, about screen printers, much bigger. It's about really replacement play. It's about the AIC that I'm going to touch later on. So there's a lot of focus right now and we build an organizational focus on customer success, really helping the customer to go and to become successful and to deliver the volume that they expect, the impression that they expect. There is a major focus on that. Also, on the sales side, we have a focus on consultative sale. This is really, really important because until recently, we were focusing on moving boxes now it's much more consultative sales and being with our customers, supporting them and helping them to grow longer term and really building partnership with our customers. In terms of the route to market, once you're selling products, solution like the Apollo, $1.8 billion Apollo, our entry level is about $500,000 or more. Really a different route to market. And we're evaluating every region, every country, how do we do the route to market and moving in some specific area to a more direct organization like we've done in the U.S., like we've done in Germany. And recently, really, we completed a move to a direct organization in France, but we're also investing in hybrid. There are places that you have to work with partners, and they have tons of knowledge and experience, and they know the market and the language, but we are working hand in hand. We are building a hybrid motion with them and also building strategic alliances. This is also very important in specific market segments that we are going after. The last thing I would like to touch before Lauri's coming and sharing with you long term is about the new business model. So we have the CapEx that you're all familiar, we're selling systems, we're selling ink. We are selling services. But I would like to touch now on the all-inclusive ink. which is we were piloting from the beginning of the year, actually started a bit at the end of last year. And we're seeing, guys, a great success. I mentioned a game changer on the Apollo. This is the second game changer that we are bringing to the market. We see really, really nice adoption by new type of customers, screen printers that would like to join and to move into on-demand production. So what is the all-inclusive? What does it cover? And Lauri is going to get into the detail of financial, is covering what customer is paying for the click, it's covered the systems, cover the consumable, the ink, covering the full service, software, workflow, everything under one roof. What is customer committing in is a minimum volume that they are going to print on an annual basis. And this minimum volume, we're calculating into a revenue that we are going to get and the contract is for 5 years. So for the Apollo, for example, is around $1 million commitment of revenue that Kornit going to generate from the commitment of the customer on the impression that they are going to print. The benefit for the customers is that they know exactly how much it is going to cost them, the T-shirt or the hoodies or whatever they are running. It's a predictable cost. There is no surprises. So it's mainly -- it's very good for new type of customers that they don't know exactly what is the cost and how to run digital, for them it's a perfect solution. Another thing, no capital investment. They don't need really to invest in advance. Not everyone has a strong capital capabilities. They have incentive actually to produce more than the minimum commitment. So what we are telling them on the minimum commitment, for every impression you are paying x above the minimum, you're paying x minus x percentage, y percentage, okay? So they have incentive to run above the minimum. And this aligning the cost that they are paying to the revenue. Actually, they're getting more -- they're getting first the revenue and then they're paying Kornit, which is a great model for them. Who are the customers that are choosing all-inclusive? So one detail I mentioned, is net new customer to digital. The other one, that customer is saying, "I would like to know exactly what it is going to cost us." You will hear later on. We have customers in the panel that's using both CapEx and AIC and they can tell you the differences. And of course, if someone wants -- has limitation on CapEx or they would like to use the CapEx actually in expansion, in acquisitions, in other way, this is another great potential. The AIC is now available for the Apollo and Atlas MAX is not available at this stage for the Presto. On the other hand, we see customers that's still buying and will continue to buy on CapEx, the regular model. And you will hear today from a customer that decided to run on CapEx because they know exactly the cost of running and they know that they can run cheaper if they're buying on CapEx. They have high volume. They know exactly how much it will cost them and they compare it to the all-inclusive. In all-inclusive, there is a premium, of course, that you need to pay. So we see those existing customers, some of them choosing to stay on CapEx, some of them deciding to move to all-inclusive. But overall, we see this opening our market drastically. What we envision moving forward, and you will hear it also from Lauri, it's about 75% of new deals, new systems that we are going to ship and install will be on the DTG side will be on AIC, 25% will be based on the CapEx. Now I think it's the time to hear from Lauri. Lauri will go to share with you financials. I know that many of you are looking for the financials longer term. So the most interesting part is starting now, and we'll see you in a few minutes. Lauri, please.

Thank you, Ronen. I'm going to talk a little bit about our AIC model, our long-term financial model and our capital allocation strategy. So let's get started. All right. Let's first take a look at an overview of the AIC model, which marks a significant shift in how we approach the market. Starting with the basic mechanics. Customers pay us a fixed fee for a committed volume. Once this volume has been reached, they will enjoy a more favorable rate on incremental impressions. Each contract under the AIC model has an initial term of 5 years, giving us a fixed revenue expectation from the minimum volume commitment. Importantly, the AIC model aligns our revenues with customer success. As customers grow their production volume, we generate more impressions and revenue. Now let's look for a moment at the accounting side and how the AIC model impacts our financial statements. A key distinction of the AIC model is that revenue is recognized over time rather than recognizing revenue upfront upon system delivery as in the CapEx model. Thus, we align our revenue recognition with the actual usage of the system, recording it as the system generates impressions. AI systems are treated as long-term assets on our balance sheet and depreciated over 5 years. Just note that the operational life cycle of these systems will continue beyond their depreciable life. Double-clicking, let's get down on the recurring revenue. We expect annual recurring revenue from the AIC model to be around $1 million for Apollo and approximately $300,000 for Atlas systems. As was mentioned, we are not planning at this time to expand this program to the Presto solution. From a profitability standpoint, we project that over a 5-year period, the AIC model will produce about 1.2x the gross profit dollars generated under the traditional CapEx model. This reflects the AIC model's volume and price advantages, which are used to cover capital costs. Payback. Within just 2 years, the AIC model starts to deliver positive cash returns on a per system basis. By year 3, we're generating sustained profitability and cash flows. Beyond year 3, there is also room for upside potential as customers renew their contracts beyond the initial term. The AIC model, therefore, offers clear visibility into our revenue streams while generating a strong flow of high-margin recurring revenues with an attractive cash return. Now let's look at our financial model. The key targets we're aiming for and how AIC plays into them. On revenues, we are targeting mid-teens CAGR over the next 4 to 6 years. This puts us on track to achieve a long-term revenue target of approximately $400 million to $500 million. While we continue to expect modest growth from our existing business, we expect AIC to be a meaningful driver of revenue growth over the next 4 to 6 years, reaching approximately $150 million to $250 million. On gross margin, our current annual gross margin is in the mid- to high 40% range. As the AIC model becomes a larger portion of our revenue stream, we anticipate our longer-term gross margin to reach the mid-50%, approximately 55%. For our investors, this means that as contribution from our AIC model grows, we move towards stronger profitability. On adjusted EBITDA margin, we remain focused on delivering positive adjusted EBITDA margin for the full year 2024. Looking further out, we expect to drive adjusted EBITDA margin to approximately 25%. This will be driven by revenue growth, gross margin expansion and discipline over operating expense growth. This financial algorithm reflects our commitment to balancing revenue growth and achieving scale with profitability. We believe this framework positions us well for sustainable success in the coming years. Now let's talk about the cash impact of our growth investments in AIC. Growing the AIC model is a major strategic priority. To ensure we capture the full potential of this program, we are targeting a total investment of approximately $90 million between 2024 and 2027. As pictured here, cash flow will be impacted during this initial build-out phase. While these upfront investments are part of scaling this new business model, we expect the model to begin generating positive free cash flow by 2028. This will mark the transition to a phase in which AIC generates strong long-term cash flow even considering additional growth investments. We, therefore, believe the long-term return potential more than justifies the capital outlay. Next, I'd like to outline our capital allocation strategy, which is designed to balance organic growth investments, strategic acquisitions and returning capital to shareholders. In terms of organic growth investments, as discussed, our AIC program will drive most of our organic spending as we aim to scale the program. In addition to organic growth, we're committed to disciplined capital allocation, balancing organic investments with strategic acquisitions. Our focus will primarily be on small- to medium-sized bolt-on acquisitions that allow us to add unique technology and/or enhance our go-to-market capabilities. And lastly, we continue to be committed to returning capital to shareholders. In this regard, I'm pleased to announce that Kornit's board has authorized an additional $100 million for our share repurchase program. Our additional $100 million share repurchase program demonstrates our confidence in Kornit's future growth and our commitment to maximizing shareholder returns. Let's take a closer look at our share repurchase authorization and the rationale behind it. We believe Kornit's current valuation does not properly reflect the long-term growth, profitability and cash generation potential of our business. We view this disconnect as an opportunity to deploy capital to drive shareholder return as our fundamentals improve. As a result, we are committing to an additional repurchase program of up to $100 million. We do want to act quickly and therefore, are aiming to complete this program by the end of the first half of 2025. We believe that completing a total of $165 million in share repurchases by mid-2025, not only delivers rapid value to our shareholders, but also reflects our confidence in our trajectory. Before I conclude, I want to briefly discuss 2 new KPIs that we will be disclosing to give you a clearer view of how our business is performing. The first key metric is impressions, which tracks the actual number of digital print made. Beginning in Q1 2025, we'll report the actual number of impressions printed on a trailing 12-month basis. This is a critical KPI for us as we shift our focus to maximizing the number of impressions generated through our on-demand digital production solutions. The second KPI is annual recurring revenue, which captures the recurring revenue we expect from our AIC contracts. Again, we plan to begin disclosing this KPI in Q1 2025. We expect this to provide a clear view of our predictable revenue base and help investors gauge the growth and potential of this AIC business model. Please note that we will continue guiding to revenue and adjusted EBITDA margin. But by tracking and sharing these metrics, we aim to provide better insight into both our existing business lines and from our rapidly scaling AIC model. So in summary, first, our all-inclusive click model is a game changer. Second, our focused go-to-market strategy, combined with our innovative technologies and business model is poised to deliver sustained revenue growth and profitability. Third, we remain deeply committed to profitability and generating strong operating cash flow, and we will invest in scaling the AIC model to improve profitability and cash flow in the long term. Fourth, we will continue to carefully evaluate small and medium-sized bolt-on acquisitions that expand our serviceable market and complement our core solutions. And finally, in line with our capital allocation strategy, we plan to repurchase up to $100 million of our stock over the next few quarters. We are truly excited about the road ahead and confident that Kornit is well positioned to execute on these objectives and deliver in the years to come. Let me turn it back to Ronen.

Okay. So before we conclude the first part of today and moving to the second part, and I can tell you, the second part of today is the most impactful one because you're going to hear from our customers and you're going to hear some exciting news from our customers. I would like to give you kind of a summary from my perspective, looking at Kornit today and where we are heading. We were talking about really the market. The market is ready for on-demand. The market needs on-demand for the agility, for producing how much they want, where they want and releasing the creativity. We were talking about the technology, and you will hear it from our customers, you will see who is using it in terms of brands and retailers and fulfillers. Technology is now maturing, is ready, has the quality that the biggest market needs, the replacement market for the screen and for the reactive. And we touch on the go-to-market execution, exactly who are the target audience that we are going, what are the changes we are doing in the organization to capture those opportunities. And we already see the results of it. When I'm looking forward, I'm asking myself a question, how can I deliver the message of belief. How can I show you that things today with Kornit is different. As Kornit today is a different company from the last investor call that we had like 3 years ago. Our main business today is coming from brands, retailer, fulfillers that are serving those brands. Yes, we are still in the customized design and it's continued to grow. And finally, we see our customer installed base and the customized designed. The utilization of the machine is coming to a peak and we're starting to see them ordering. Yes, you will hear today from some of them, they are ordering more systems. It's happening. But our focus is really on a massive market that we are going after with the technology that we have. We managed to diversify our business, both in terms of technologies, both in terms of the markets we are serving, if it's the customized, if it's the replacement, if it's from a territorial perspective, we can see the growth coming in Europe and Asia. And of course, here in Latin America is growing very fast. But we also see diversification in our customer base. We used to have few customers that generate very nice revenue for Kornit and was growing and those customers continue to grow and will continue to grow with Kornit. But we really enlarge the number of customers and the type of customer we have today, we have many more large customers and massive opportunities ahead of us. The Apollo, the All-Inclusive solutions that we have right now that we're bringing in to the market really opening up the last milestone that the market needed. We are ready. We believe in this market -- and I can tell you that the management and we'll do later whole introduction with the management here, they're all committed and believe in the direction of the company. They're all shareholders of the company, and they are all investing moving forward in the company, including, of course, Lauri and myself. We believe. So the time to break for 20 minutes for a coffee. We would like the people on the webcast to join us as well in 20 minutes to hear the customers. I mentioned this is the most important and impactful session. So we'll be back here at 10 -- to 10 to 11, sorry, Vegas time. So take a break, take a coffee. Thank you for the people on the webcast. Please join us in 20 minutes. Thank you very much. [Break]

Guys, we're going to get started here with the customer panels in a couple of minutes. So if everybody could return to their seats, we're going to dim the light to get some customers up on stage. Thank you very much. All right. Please take a seat. Hopefully, people on the webcast are back with us. All right. We are ready, I think, for the most exciting part of the day to hear from our customers. In the next panel, we're going to have 3 different panels. The next panel will be about customers for different places, different type of customers and exciting stories, and there will be also some interesting announcement, I guess, from those customers as well. So I would like to call, first of all, Ilan. Ilan Elad, our presidents from Americas. He is going to host this panel and introduce their customers. So Ilan, the floor is yours, please.

Thank you. Good morning, everyone. As Ronen said, I'm the exciting part of the morning. So I hope all of you had some coffee and a bit of rest and I'd love to call the 3 panelists that we start with. Scott Valancy from Monster Digital; Alan Gentry, from T-Formation and Chris Work from Zumiez, please. Yes, you sit here on this side. So we try to put together a few customers. The idea would be that I'll ask a few questions, they'll introduce themselves, and we'll move it from one to another. So Scott, you get the first one. So Scott, from Monster digital, we'll start first with a short video. [Presentation]

Beautiful. Thank you. So Scott, if you have some. Maybe you tell us a bit about Monster Digital, a bit about your business and how you see it today? If you could share a bit of name of customers or customers that you cater and how you see the future over the next 5 years. The mic? Scott, while we're at it, why don't you take mine. But don't pull me too close. Go ahead.

Leave it to Israeli innovation. Great. So thanks for having me, Ron and Ilan. We've been a trusted partner for Kornit, coming on 15 years now. We've been in the digital business a long time. The company actually started as a conventional screen print company over 22 years ago. And we do service all tiers of distribution in retail -- physical retail from Target all the way through Kohl's, Specialty Hot Topic and Spencer Gifts, those kind of customers as well as boutique business. The company got into digital printing. I don't know why we got into digital printing. It was unique. And when I first met Kornit at one of the trade shows over a decade ago, I liked the type of equipment they were showing. I thought it was very unique, small runs, one-offs, and we've progressed quite a bit with Kornit through the years. Fast forward, we run 3 pretty large facilities, 1 domestically, 2 in Mexico that service our retail -- physical retail partners and our e-commerce customers, which include now retailers. Pandemic actually ignited our retail partners to really get into -- seriously about -- thinking seriously about their e-com sites when they closed down physical retail, and that's really ignited a big part of our business relationships we have go back over 2 decades, and it was an easy fit for them to acknowledge the on-demand piece of our business and how valuable that could be. We are a back-end B2B provider. We service large retailers, medium retailers, small retailers, brands, licenses and we do it in a very quick fashion. The technology we use for on-demand printing is...

Go ahead.

Technology we use for on-demand printing has developed. We started with [ 931s ] many years ago. And now you saw from our video -- we're investing heavily into Apollo. We went through all the way through Atlas's, Atlas MAX's. We have a pretty large arsenal of Kornit equipment that manages our fleet in the 3 buildings.

Excellent. So now we're going to switch back. I'm going to try to keep this. So Scott, a question that I think a lot of the audience in Ronen and Lauri spoke a bit about the Apollo, you were one of our three betters. Chris, get ready, same question. What's your impression after a year? You installed, I think, last October, it came in. What's your first impression? How is it working?

So we always stand up with Kornit as a beta test opportunity. We do that because we think we're a good fit. We have a very intensive -- extensive engineering department, and we help Kornit with analytics. And we felt that when we looked at the Apollo, we thought that this was definitely new. It was, what I call pioneering, not just innovative, but pioneering. This has never been done before at the throughput speeds and the quality that was -- we were trying to get. And coming from the screen print background, we are also in the same position where we run an enormous amount of screen print hits per year. And by moving over even just a small percentage of those could be dramatically helpful to our business, turn times, costs, and we thought this machine might be very relevant for us. So we actually launched the machine last November. And right before peak holiday for e-commerce, I could thankfully say that we did in a very controlled environment, but we had over 90% uptime with the machine. We're producing at that point, at speeds a little under 300 an hour, just starting. And those are getting better every month. That's when we started the Apollo journey.

And when you and I spoke, we spoke with [ Evan ], the partner and with Ronen, your vision is actually to move away slowly from a lot of the screen work. What's the logic in that moving forward?

Yes. So in our JUAREZ Mexico facility, we mix screen print and digital. That facility now is completely made on-demand product. Digital is overtaking screenprint for space allocation. In our next Mexico facility, the same thing is happening. We continually look at runs what used to be 100 or less as potential digital candidates. Now we're looking at run sizes of 400 to 500 units or less. So it's a multiple of 5. And simple fact is our retail partners. They get smarter each year. Every single retailer partner, we have test their graphics before they roll them out to thousands. And they usually test between 150 to 350 units, perfect for a digital environment.

Excellent. So one of the -- when Ronen and Lauri talked about different models. The next panelist will -- actually went to CapEx route, you have a mix. What was the decision and why did you decide to go down the AIC on some of your systems versus others?

Yes. We definitely have an equipment from [ Capex AIC ], the Apollo because coming out of beta.......

Now, there's a problem with the mic. So here you can -- we'll give -- but you have to just hold it a bit away.

Yes. We felt that with the new Apollo systems, we wanted to start with -- we did do some CapEx, but we also wanted to do a mix of AIC. we're not sure where our sweet spot is. It is a complicated story, I call it, and we are first looking into the benefits of doing either/or as we prove this machine out. I agree with the statement that CapEx will probably be more economically favorable to us. So we might end up going that route. But we want -- we know there's a lot of work to be done with the Apollo. There's software upgrades and other things going on, increased speeds. We want to see where they're at lands and really find out what's best for us and not having a CapEx model is challenging if you don't have a lot of work. So we are -- thank goodness, we are busy. We have a busy facility, and those dollars are being redeployed in other areas to professionalize our company with staffing, artificial intelligence agendas, acquisitions, things that we find that we could deploy capital in different places and still grow our digital platform.

So as our largest customer -- let me try this one -- you hold that, I'll try -- so as our largest customer, you have a very large installed base. How do you see the future in the next year? Any special things that we could share with the audience?

Yes, it's interesting our company is split. We have a physical retail section of our company that we support old tiers of retail that I mentioned. Then we have a digital side of our business and that is now becoming increasingly, I guess, blurred lines. There are normal lines between the 2 parts of our company. Product flows through our facility depending on need, speed, type of order, units, limitations of each of the types of printing embellishments, whether it's screen or digital. And we're seeing a future factory where you'll need all the tools to be able to support retailers and brands and licenses with any type of order and do them best economically but also best in class from a speed and also a quality perspective.

And any future plans of expansion, Apollo-based?

We are. I mean we're -- as we see that we're able to take a nice percentage, which is still small from our screen business to move it over to digital because of the amount of units we're able to attain on the digital side, we are entertaining another 10 Apollo systems for next year. And that will really just be tonight. Thank you.

Excellent. Thank you so much. Thank you for the trust -- and I'll now -- I'll take that from you, and you can pass that to Alan. Alan is our newest member. We closed the Apollo last week. He is the owner and co-founder of T-Formation. I do apologize we had an issue here with the video earlier. So Alan, could you just tell us a bit about your company, how long it's been, who do you cater a bit about your business? Thank you so much.

Gladly. Can you all hear me? I can hear it, too. As Ilan stated, my name is Alan Gentry. The name of my company is T-Formation. We are full package facility located in Tallahassee, Florida. And we've been in business now since 1987, so 37 years. Basically, our company had -- well, first of all, let me tell you who we work for. We've done a lot of -- we do a lot of work for Coca Cola. We do a lot of work for McDonald's, Adidas, Nike, Champion, a lot of big names, and we produce a lot of volume out of our facility. But one of the things that attracted us so much. And I know that Ilan said that we just bought the Apollo, but one of the things that attracted us so much to the Apollo was is that the number of units that we felt that we could get on a shift basis, and awareness. And I think Ronen did a very good job of explaining who we are and why we've come to this place to make this purchase through Kornit, and that is not necessarily from an on-demand perspective. We do -- we've dabbed our feet a little bit in the on-demand space, and we are currently running in Avalanche, and we're keeping it -- ever since we've brought that machine into our facility, we've kept it full every single day. But what we really like about this is that -- and as I mentioned, Ronen mentioned it, we're looking at it more from a labor play for us or labor perspective just because we have a very tough labor market in Tallahassee, Florida. There was a tough labor market in Florida in general. But anyways, we typically are missing, gosh, I'd say, 10 to 15 people a day. And it's really, really tough. And when you're missing 10% of your workforce, I mean, that's 2 or 3 automatic presses that we could be running. And I don't know if we mentioned this, but we've run 10 automatic presses. And when you're missing 1/3 of your automatic presses because people just aren't showing up, it's very tough to make a profit. So like I said, we've experienced a little bit in the on-demand space with the Avalanche and I sent my General Manager, Davis McDermond up to the Kornit Connections. I think it was a couple of months ago. And he came back and he said, "Hey, I've got a great answer for our personnel problems. And so he told us about the Apollo and I said, "That's great, how much does it cost?" And he told me it was $1.8 million, and I'm like, "Oh my gosh, that's a lot of T-shirts" that...

That was on discount.

Yes. I hope I didn't give that away to anybody.

No, that's good.

If you got up for 1.9, we struck a great deal. I'm sitting next to this guy. He's got 10 of them. We probably got it for half of them. But anyways, so first thing I did, obviously, as an owner of the company, I said, okay, let's sit down and let's go through the numbers. And like I said, we're missing 10 to 15 people a day. And there's really nothing that we can do about it. It's definitely a labor's market in Florida and from what I've talked to a lot of people and other -- even other countries, they're suffering the same thing. And so basically, we sat down and we ran the numbers and we thought, okay, the simple numbers are this. If we're taking away a press, that's 4 people. So if you take away 3 presses, that's 12 people. So that was certainly a good amount of people. But then when you start thinking, okay, let's go into the screen room and we're not going to be burning as many screens because we're using this machine. And what we're planning on doing with it is using the machine for 3 shifts, during the day shift, a night shift and then a graveyard shift. And if we can get that machine to run that amount of units per hour, okay, there's 12 right off the back that it's going to say, then it's going to save another guy in the ink room that's mixing inks. It's going to save in the screen room that are burning screens. I mean, we just kept on and on and on, and we realized said, oh my gosh, okay, at $1.8 million, and we financed it, we're coming out cash positive just on the amount of savings that we're going to have per month. So it really made really, really good sense for us. I think that we've probably made -- and Davis, my General Manager, he asked me, says, "So how do you feel about this dropping $1.8 million on this machine." And I said, "Well, the numbers pretty much speak for themselves." And so we're all very, very excited about it, and we look forward to, quite honestly, if this machine works like we think it's going to work, there's no reason why in the next couple of years, we're replacing the next 3 presses then replacing the next 3 prices because the prints that we've seen are fantastic. Like I said, we've run the numbers and we run the numbers at 400 to 300 at 250, 200 an hour and it's still. It turns out for a win for us. So we're very, very excited about the opportunity and look very, very forward to getting our machines as soon as possible.

Excellent. First of all, thank you for getting me into trouble because while everyone here is taking numbers, my targets for next years are going up. So please calm it down a bit.

I paid 2.5 for that machine.

So you -- first of all, welcome on board. And again, you're sitting between 2 of our bigger customers, and we're very glad that you joined the family.

Yes, I feel very intimidated, by the way.

Yes. Scott is intimidating. Chris is a bit nicer, but Scott is a bit more...

Chris has been nice.

But on a -- I'd like to hear how you think your customers will view the move to digital versus screen. You've mentioned some of the bigger brands that you work with, would they have any preference of how you work or from your -- from their perspective, quality pricing and they move on?

Well, I tell you, we do a lot of water-based work on our presses now as a result of some of the retail customers that we work with. And feeling your print of your water base print on the Apollo versus mine, I mean, they're virtually the same. So I don't see any issue there. I think the main question that we're going to be asked is, how close can you get to our PMS or can you match our PMS, and I feel pretty comfortable there that we're going to get very, very close as far as that's concerned. So I think those are probably the 2 items that we're going to need to contend with. But like I said, from what I've seen from the samples that you all have sent to us, we feel pretty comfortable with the feel of the water base and of the colors that you're matching.

Excellent. So just to connect your story to the Connections event, and it goes back to something else and it goes to this panel is the Connections event is an event that we do with all our customers, with our demand generators, some of the suppliers. And through that event, people do business together and connect between them. And I'd like to thank the formations for joining, and joining the team and thank you for the business and trust, and thank you very much.

Thank you.

So Chris Work, the CFO of Zumiez. [Presentation]

So Chris, first of all, thank you for joining us. And for the audience, just to understand, Chris is the CFO. Zumiez is a retail brick-and-mortar player. And thank you so much for joining. And the first question is actually, after COVID or during the peak of COVID, everyone thought that brick-and-mortar was dead and everything would be moving to e-commerce. How do you see the change? It's come back a bit? How do you see it today? How does Zumiez see the future between the e-commerce and the regular retail?

Thanks for having me. I think this is working. There we go. Yes, I'm a little intimidated actually myself as a finance guy sitting up here with 2 screen printers who actually know what they're doing. So this is really cool. But from a retail perspective, as you saw, we are primarily mall-based retail. We have about 750 stores around the country. I get asked this question a lot because of our footprint. Now certainly, we have a digital business, but we refer to it like a lot of retailers is omni. And I think this is a really a question that we can sometimes get mixed with our own beliefs. My guess is all of us here in this room have -- are lacking something that at least our customer has. And you saw in our video, our customers a 12- to 24-year-old much younger than many people in this room. But that is time, right? We just don't have time to go to the mall. And so we like to have -- I like to have things delivered to me. But I do believe there is this experiential piece of retail. And there is this piece that malls will not go away. That is my hypothesis. What we have in this country is we are over-malled. There is no doubt. And there are malls going away, and we see the stories about it. However, one thing that malls have is they have the best [ dirt ]. They exist in communities that are built to service those malls. They're near freeways. They have transit that goes to them, utilities go to them. And you're seeing landlords today redevelop malls all over the country to be more community centers, to be more hubs. And we believe that will continue. What you'll have is you'll have less malls, but each market will develop stronger malls. And that's where people will go and gather because at the end of the day, we're all humans and we desire human-to-human connection. And so it becomes that which could be commoditized with that, that is different, right? Those people that came up here and touch these garments, they're different. They feel different. Some of that you can't get from a digital experience. So we believe in the long term of malls for sure. We believe actually an omnichannel experience, and our customers are going to tell us how many stores they want by how they shop in malls. And what we saw over the last 5 years was digital was about 15% of our business heading into the pandemic and went to 28% of our business in 2020. And today, it actually is below where it was pre-pandemic. And I think it speaks to what you're seeing here in the market with the consumers wanting to travel more, wanting to eat out more, wanting to experience more. They want to shop for things that they want to go get.

By the way, just to tell everyone, there is a Zumiez shop for your kids, one at the beginning of the strip, but one at the end of the strip. So Chris wanted to make sure you stop by and get a T-shirt.

Absolutely. Printed on Kornit equipment.

So when we look at print on demand, and we usually talk about the one-offs or we talk about the e-commerce, you've actually, through your teams have started with a few systems you took in Apollo. How do you see that print on demand, the digital printing going into brick-and-mortar where it usually used to be screen printing? How do you see that mix growing?

Yes. I think for us, printing was a unique option for us. That was different than I think maybe why printing on demand really started. What we thought of it is we operate with a lot of tons of small brands. We will launch 100 to 150 small brands each year. So it's normal for us to micro-merchandise and micro-assort and maybe this T-shirt brand is only hot in this market today. And as a 600 store chain in the U.S., 50 stores in Canada, 90 stores in Europe and 25 stores in Australia. That's tough to do. And so we're used to working with big brands that have established supply chains and probably have their own printing networks, maybe even through these guys. And that's going to be okay, they're going to have their networks. But we're going to have a lot of small brands that what we found is as they go into our stores, we're not always sure which one is going to hit. And it's not uncommon that when they did hit that we would call them up and say, hey, let's get back in stock, and they tell us about what it was going to take 5, 6 weeks to get back in stock. And that's just too long in today's world. Ronen talked about speed upfront. We 100% believe in that. The customer is in control, and it is about speed. And so we looked at this software 5 years ago as an opportunity to increase speed in our supply chain, an opportunity for us to serve our vendor partners better by bringing their product to market quicker and an opportunity to ultimately serve our end consumer who's buying our product in store. So when we saw the equipment, that's what got us excited. And we brought that into our shop. We tested it. We do about 20% to 25% of our product on our own private label. So we started with the private label test, and we started to roll brands on as we prove the equipment out. And it's been a really cool game changer for us to bring our brands to market quicker.

Thank you. And I know you're not on the technology side, you have well here in the background. But you've -- we've been working together. You've started with in Atlas. You've evolved to the MAX Plus technology, now the Apollo. Can you just say how that technology has evolved in your relationship with Kornit over the past few years?

I'm glad you recognize me as not a technology guy, that I'm not. I am a numbers guy. And I think for me, that's what this came down to. We crunch numbers. We worked with the operators to say how much could we do? How would this pencil out as we work through it. And honestly, we worked with Kornit because I think what we were doing, especially at the time we started doing this was a little bit different than the one-off printers. When we were talking to them about doing the 500 runs, the 1,000 runs, the 400 runs, it was all unique to us and how to do this. And it was really Ronen and Ilan and many other people from the Kornit team they sat down with us and helped us really work with the technology, listen to what we wanted to do from a perspective of what our goals were and merge those together. And so the technology has definitely evolved the reporting has evolved, the processes have evolved, the maintenance has evolved. All of those things were really important for us to figure out because it isn't just the technology and putting them in shop. It is what your design upfront is, what you're testing is, how you get the brands comfortable with what you're printing, how you have confidence that if I print a T-shirt today, and I print it tomorrow, and they end up in the same store and they're hanging next to each other, they will look the same. And those are all things that we worked really hard with the Kornit team on to try to master. And we're still working on today, but we've made massive progress that gives us confidence in the systems.

So first of all, thank you, Chris, and thank you, gentlemen. And our motto as Kornit, Bonding Matters. And I think with at least two and hopefully, with the third, we show that we may have started the road or the journey with our customer in a certain manner, but today, we're partners. Our customers give us a lot of input on how to take our technology to the future, how do we make it better, how do we make it more efficient, how do we add value and make them more efficient to their customers and make more money. At the end, that's our job. And again, thank you, gentlemen, for joining us. A big round of applause. Paolo, please. I think I need to move this, so I'll leave this to you. Thank you so much, guys. Paolo, please, the floor is yours.

Good morning, everybody. I'm particularly pleased to be here today to share with you this journey into the future of fashion. Ladies and gentlemen, meet OGAT. [Presentation]

Thank you. Ladies and gentlemen, welcome to the world of OGAT, O-G-A-T, One Garment At a Time. This is where innovation and sustainability merge together. Today, we're going to explore how OGAT represents a bold new approach in the fashion industry. And we believe that we are not just making garments but we are redefining the rules of the game. We are redefining the entire fashion experience through our commitment to exclusivity, sustainability and quality. So OGAT is proudly part of Cimpress, NASDAQ listed, CMPR, between $3 billion and $4 billion revenues. Cimpress is a global leader in print and demand and in customized production. And OGAT leverages 30 years of printing experience and technology innovation of PixartPrinting out of Venice in Italy. And all these is set to bring new standards into the fashion world. Now why Kornit technology? At the heart of our success is our strategic partnership with Kornit. At Cimpress, we have over 40 systems. We own them and we run them by Kornit and right now, as we speak, we are discussing about Apollo. And we leverage this cutting-edge technology in printing direct to fabric in order to deliver products that are incredible in terms of the vivid colors, in the print, in terms of quality. And with the level of customization that was unconceivable before. So this innovative solution by Kornit enables us to produce garments that are not only exclusive but to meet our standards of sustainable practices. So at the cornerstone of our production system is a production-on-demand model. So we challenge the traditional way of reducing mass producing fashion by combining the Kornit digital printing on demand with direct cutting sowing, finishing an advanced logistics system. After all, we are one of the largest e-commerce in Europe, in U.S., Vistaprint is one of our brands by Cimpress in this country. And the whole production process is redesigned to allow us to produce on demand, therefore, to minimize the overstock and to make it possible that best sellers are always available. So this caters to the demand for exclusivity of our customers and makes OGAT a leader in responsible fashion. Sustainability. OGAT is designed to bring sustainability, is designed for the planet. We deeply -- we're deeply committed in ecological sustainability. Every garment that we produce is 100% organic and is printed with Kornit Inc., so eco-friendly. The usage of water is almost zero, virtually zero. And this makes the product sustainable. Products is sustainable. The process is sustainable because of the fact that we don't have our reduction. And therefore, we minimize the unsold products. So for us, sustainability is not just a buzzword. It's embedded in every step of our process from the design to the delivery. Our mission is to prove that fashion can be both beautiful and kind to the planet. Now thanks to the Kornit direct to fabric printing technology, we are able to create truly unique pieces of fashion. Let me take another example here. We can do a symmetrical print. We can do designs like it's very evident in this case that matches across the garment, as you can see, through the theme. And this makes every piece -- every piece tells a story. And we collaborate with the designers and with creators to generate what we call Bespoke Creations. So what we do reflects the commitment to artistry. And this resonates with fashion-forward consumers that are looking for something special, something personal. Everything that we make is made in Italy. So this is a place where technology, the precision of the advanced machinery meets the quality, the design, the craftsmanship of the Italian work. So this ensures that every piece that OGAT makes meets the highest standards, embodies excellence of the Italian design and is a symbol of luxury with the attention to detail. Also, the fact that we produce in Italy means this is a responsible production. So there is no exploitation or any unethical labor practice. Only integrity and quality in every step of the production process. So we believe that we not -- we don't just keep pace with the industry, but we are setting the pace in the fashion industry. And we do this by combining the advanced printed technology by Kornit with a sustainable exclusivity in the high-quality fashion that we bring to the market. And this helps us position OGAT in a place that reshapes the market standards and redefines consumer expectations. Our vision is that we lead the charge towards a fashion industry where exclusivity and sustainability are not mutually compatible but they can go hand-in-hand. Here is an example with our collaboration with an Italian fashion brand called HIGH, it's a capsule, limited collection called HIGH SPORT SMART. It is a limited edition. So it represents everything that OGAT stands for. We're talking about exclusivity, we're talking about quality, we're talking about design. Each piece is individually constructed, individually printed, made in Italy, 100% organic. All pieces here are made one at a time. That means 0 inventory, no unsold merchandise. And what is most important is that the best sellers are always available. And this resonates with the philosophy of the brand, HIGH. So this collection highlights our commitment to luxury, sustainability and showcases how it is possible to have technology and artistry go together. So in conclusion, we are committed to driving the future of fashion with OGAT, a blend of innovation, sustainability and uncompromising quality. So I invite you to explore our collection and to join this revolution because OGAT is not just a brand, OGAT is a movement. So you're invited to join us and to change the world of fashion, One Garment At a Time. Thank you.

First of all, thank you very much. Fantastic presentation. The innovation of Pixart and Cimpress is unbelievable. Just to remind -- to tell everyone, actually, we started with Pixart on this journey about 1.5 years ago. And to see where they stand now and sell it in the commercial world is unbelievable. But Pixart is part of a bigger group, like you mentioned, Cimpress. And Cimpress is also customers, Vistaprint is part of it, part of the group, but a customer of Kornit, anything you can tell us about this group, what are they doing today with Kornit? Any plans?

Yes, the collaboration with Kornit goes back a long time, even before your time, I believe.

Yes.

It was the time of your predecessor sitting over there.

Gabi.

Yes. So as I was saying, we have over 40 systems. And as we speak, we are ordering a few new ones, right? I don't know how much we can disclose here, maybe not that much. You're pulling the information out to me. You're doing a very good job. This is the best salesman, I know. It's my best partner. So I like that Ronen really like this project is investing. We meet regularly almost every month or every 6 weeks because I want to make sure that we at PixartPrinting or we Cimpress, we partner with our vendors, we don't consider them vendors. We consider them partners because we invest in our product, and we want our partners to invest and Kornit has proven to be a partner that invest in the technology because we like to stretch it to a level that is able to make it possible for us to serve our customers to the level they want. This is a very competitive market, and Kornit is really enabling us through your support, [ Shai ] and her team to bring this technology, this solution to a level that is best in its world. I have to say, before we picked Kornit, we worked for a whole year in PixartPrinting comparing it to other 4 major players at a level, and PixartPrinting is very picky. And once a vendor puts their press in our shop floor, we have more than 100 different technologies of all the major printing vendors in the world, Then it's a long-lasting relationship. But you need to work hard to get into the floor, right? And I think you guys did work hard. And we need to meet our terms. But once you are in the workshop, we work together, our engineers in R&D and your engineers work together to make sure that the product gets to a level that is best at world scale. Very often, we have been on our shop floor, beta version or even alpha version of technologies. And in the case of Kornit, we are working together to bring this pressed to the next level. And I believe we are at a very good point in the trajectory.

Thank you very much.

Well, this was not part of the deal, but I think it's honest and true feedback from our customers. And I can say the Pixartprinting is one of the most I would say, ambitious customers that a vendor can have.

Absolutely, but we are learning a lot from you. Thank very much.

Thank you. I count on your continued support.

Yes, absolutely.

All right. Thank you.

Okay. So we have one more panel before lunch, and we have another panel after lunch. So the next panel is about demand generators. You had a lot talking about demand generators, going after brands, digital platform, et cetera. You will hear about 2 demand generators here today with us. I would like to call Chris, Chris Govier, who is our CMO, and responsible for business development and working with all those brands. To the stage, he will host this panel. He will introduce the next speakers. Good luck.

I hope the -- great Thanks, Ronen,, and a great presentation, Paolo. I was on that journey with you when I was running Europe. So it was great to see the results there. This is slightly different. We're now not really talking about Kornit machines and systems. We're actually going to talk about the big world of opportunity out there with volume and demand. It's my pleasure to welcome to the stage. 2 people who are going to help me on this journey. I've got Henrik, the CEO of Gelato. Please Henrik, come and join us. And an Dan as well, Dan Dornback from Custom Ink. Please grab a seat on this beautiful sofa. And Dan, yes. A little ripple of applause for you there, Dan. Let me just take that microphone out of the way. So feel free to take a seat. So we've been hearing a lot about the market. And we're going to talk a little bit more about how we start to bring the changes that are needed to open up more opportunity. Henrik, we're going to start with you. First and foremost, I think we've got a little video that we're going to run. [Presentation]

Henrik, great video. I'd love to drill into a bit more of that if we could during the next 10 minutes or so. But perhaps you can just explain a little bit about as a CEO, what's your key role in Gelato. And tell us a bit more about what Gelato do and your vision for the future?

Sure. First of all, thank you for inviting me. I'm not the CEO as much as I'm the founder. And the reason why I mentioned that is because as a founder, I think it's very important to have a vision set from day 1. And I used to be CEO for a $500 million telco before I founded this company. And we had operations in 23 countries. We tended to produce everything including Merch in Gothenburg, Sweden, and then we shipped it out to 23 countries. It was expensive. It was time consuming. It was an outdated model that my 3 kids weren't proud of.

And not particularly sustainable, of course.

It's everything but sustainable because you're getting demand. So one of the things that I wanted to create was a software that connected the idle capacity around the world. And why is that so important? Well, not only for the reasons I mentioned, but also, which I think is critical, where is the consumer demand going. The consumer demand, if you ask any sane person is not going towards standard and mass production, it's going towards local, highly personalized, often created by designers and creative individuals across the planet that then wants to produce locally to support the demand. So that's really the background for Gelato. And I just think that Kornit represents, I mean, if you build a software and you connect to machines across the planet, One of the things that is absolutely critical is that you pick your partners with care and that you pick reliable partners that can deliver consistency, and that actually allows you to connect to global brands and global demand in a good karma fashion.

Great. And so when you're starting on the journey of what I would call traditional print, graphic arts printing, printing on papers and other elements like that. When you start to move into textile and apparel, what kind of challenges does that create for you and for your customers?

To be honest with you, I would reframe the question. I would say what type of opportunities does it create? I mean in a way, when you look at the latest Kornit technologies or the Landa, which we also have a global partnership with, even me and my mother, she's a doctor, but we can actually create and establish a print company and start to produce with consistency and good quality. So I think if you compare 10 years ago with where we are today, you had to know a lot -- you almost had to be a craftsman, or craftswoman. But today, your technology is allowing people that have a passion to create companies to go into the production on-demand industry. And then if you look at the creator economy on top of that, I mean it's kind of crazy if you go back 10 years, the creator economy hardly existed. Now Goldman Sachs -- I read a report that Goldman Sachs is estimating the creator economy to move towards $0.5 trillion in 2027. Now what do these creators do? I mean if you ask my 3 children, Isaac, it was a proud moment and it was not a proud moment. So his friend turned 17 the other week, and Isaac was so proud because he'd ordered a T-shirt for his friend. And it happened to be produced by a German production partner to Gelato and shipped to Norway. So we want Kornit machines in Norway. That's a hint. But on the T-shirt, it said, save water drink beer. But the point is, would he do that? Would he have done that 5 years ago. I would challenge would he have done it 3 years ago. Imagine a 17-year-old boy going in automatically and in a fully natural way, going online, finding a creator, ordering that T-shirt and then giving it to his best friend. And then, of course, he bought 2 one for him and one for his friend. So these are massive opportunities. And that's why we have this partnership and why I'm super excited about Kornit and KornitX and what we can give to the creator economy but also global brands, which I think will come.

Yes, I think that was another area. I think, by the way, I'm surprised you didn't get a T-shirt yourself, actually, I thought that would be something.

No, I just drink tap water.

Very good. So there's many components to Gelato. You've got the connect element, you've got logistics, procurement, et cetera, which really creates value for your ecosystem. But ultimately, it's about kind of bringing in the volume and the demand at the top end and you've spoken about the creator economy and the importance of that, but where does the future lie in terms of where you're trying to push Gelato and how you're opening up more and more opportunity from a demand perspective? What are brands looking for and those bigger kind of customers, those global customers.

Well, I think there are 2 categories of brands, especially considering today's event here with Kornit. You have the investor community, the investor, global brands. So we did a capital raise 3 years ago with leading global investors inside partners Goldman Sachs Asset Management, which took onboard $0.25 billion. So that says a bit about where the demand is going, and these people to do pretty solid due diligences. So leading into that, why do these leading investors invest in a company like Gelato? Well, I can't mention the brand, but I'd like to answer your question by giving you an example. So if you think about the Formula One industry, I guess, everyone here knows about Formula One.

They even have one here in Vegas now.

I know. So one of those brands, one of those teams contacted me, and they said that, and not to reveal the brand, but when our driver won in the city, you can never guess what driver -- or you can never say what driver will win. Looking at the demand on our web page and what people were clicking on, we could there estimate, have sold 200,000 T-shirts. We sold 0. We have intellectual property rights problems. We don't have kind of a network that is following the big megacities around the world to each and every Formula One race. We want to bring our personalized items, the apparel products that we want to sell to our fans online. And when this driver wins for our stable for our team, we want to be able to support and fulfill that demand. And so -- and also, they say that if we sold this for that brand, the other brands, the other teams will follow suit. You have another brand, which we don't have any relationship with, but it just makes it so crystal clear, which is Starbucks. I mean if you think about it, you double click on Starbucks, they have about, and don't quote me on these numbers, but I believe they have like 38,000 stores in plus 80 countries. 15 years ago, they sold 0 merch, 0 merchandise. And today, they are personalizing the merchandise down to the individual city. You go to Seattle, there is the Space needle. You go to Berlin, there's a TV Tower and so forth. So how do you move with the sustainability legislation coming our way, how do you move that production local? And who's going to fulfill it? I think it's going to be, amongst others, partners here, but also the support with our software. Because if we take Europe, this is something that I think is a huge opportunity for the industry. In Europe, if you look at the legislation coming 2026 to us, you must bring the production local, and the distribution. Because if you bring the production local, you will shorten the delivery distances, which is a key component. We work with KPMG for 18 months. Like a key component is shorten the delivery distance and stop guessing the demand.

So then on-demand agility is really vital, as you say and I think we've heard a lot about it this morning and from some of the other guys, et cetera. I think creativity drives that. The credit economy drives that. I think your referencing the Formula One. The element of Formula One is that you're a fan of Formula One or whatever other sport you choose, you may not be based in the location of where events taking place, but you still want to support your particular hero or your particular team or whatever it might be. So the ability to have this kind of global network of printers the GFN as we call it within Kornit, which you are very familiar with because it something you worked with across Gelato with other partners. But we find that as a route to market, which creates great value because it really does unlock that ability to be global very quickly, and our KornitX software is plugging that in creates the value that you simply make products and then sell it wherever the consumer is. So just talk a little bit to that, if you would.

Well, I think if you're going to go with a global brand, one thing you must do is to be able to create predictability on quality. And one of the things with KornitX, I mean, we're obsessed about being able to read both in the procurement in the production and the logistics and distribution, quality aspect, quality metrics. With KornitX, first of all, we don't need to reinvent the wheel. But secondly, we can actually go to global brands, which I know coming 12 to 24 months, will come all of us like our way. If you take Mastercard, just a very obvious example because of their colors and their logo, they care about that. So if we don't have like KornitX or if we don't have machines that allow us to go to these brands and represent them with confidence, but we can deliver to your demand, we're kind of lying to the customers, which we don't want to do. So I think for us, these partnerships makes 1 plus 1 equal 7, 8, 9, whatever. And that's also who we are. Like In our DNA, I think one of the problems with this industry is every printer thinks they're a software company. We're a software company. We never thought we were a printer. So by working together, you don't develop your own iPhone, you don't develop Microsoft Office 365, you kind of leverage software company's ability to build software, and we leverage Kornit and KornitX ability to generate predictability, quality and value to our customers.

Fabulous. Thank you. And any final thoughts before we turn our attentions on to Dan and who's been dodging a -- dodgy fly in here that's annoying a lot of people. But yes, there are any final thoughts, Henrik, if you have.

Well, just two, I also think the global presence is really important. Like if Kornit in this case, wouldn't have all the installations you have around the world, local production is kind of difficult to do. So I think that's something we should turn into our advantage. And then lastly, if you want, I will speak to Isaac, if you want one of those T-shirts, I can order.

Indeed. I do like to drink beer and the save the planet for sure.

Okay. good. I'll do that.

Henrik, thank, you. Thank you very much.

Thank you.

So Dan, I think we've got a little video that we'll run as well. [Presentation]

Great. Dan, thank you, very busy is and lots going on. So Dan Dornback, the Vice President of Production at Custom Ink. Great to have you with us as well, and thanks for taking time out of your schedule. For those of us that don't know, give us a little bit more kind of a flavor of what Custom Ink are and what you do before we kind of get into some of the nitty-gritty.

Yes, for sure. We've been in business for about 25 years, really started in the screen print business and the goal of the company was to bring together what we call community organizers. And that community could be your school. It could be your business. It could be your sports team. It could be your kid's birthday party, could be any type of community that as an organizer, you are wanting to build something for the people that are at that event or that organization and you're coming together to help them express themselves in a unique way, and that's very important to us that personalized self-expression that those community organizers are able to bring to the people that they support. Our goal as a company has always been to delight our customers with that high-quality product that really allows them to show that expression and deliver on that for the people that they care about. And it's interesting because while we connect with these community organizers, it's really the people that receive that garment or that shirt or whatever it is that we produce for them that they're the ones that have to love it. So we have kind of multiple layers of customers when we look at who it is that we serve, it can go very deep. But we're there to help that community organizer bring their vision forward for how their brand wants to be represented inside the organization.

So connecting communities often kind of mission-critical products, et cetera, so quality clearly matters.

Absolutely.

What are some of the other things that they're looking for, obviously, speed, you mentioned sustainable, tell us a little about the part of their plan?

Yes. Over the last few years, we've been on this transition for probably about 10 years. Digital technology has really been changing the market. And we're seeing that shift happen as shorter runs, faster production speeds. Customers are looking for that flexibility with personalization in their products. So we're seeing a change in that market that has been happening for 10 or so years. And really, the last few years, it's really a much bigger shift as the technology has come along and the ability of the production equipment has come along. So we're seeing a change in that, that we're really trying to capitalize on through our shift to production -- or shift to digital. So that shift to digital is helping us deliver on faster speeds, still at a very high-quality and it is bringing in a very sustainable part for our customers. You're having a whole new generation of very environmentally conscious people coming up right now, and there always have been. But I think it's becoming even more important now as people think about supply chain, and we've heard from some other folks today about how do we produce with less waste, how do we produce with ecologically conservative methods. And that's what we've been trying to chase. The last 2 years or so, we're making a big push on to that, especially through the Kornit platform, how do we take advantage of those things and leverage that for our customers so that they can get the speed, they can get the flexibility and deliver on a product that they're very proud of without sacrificing on quality.

And so do you think the run lengths are coming down? Do you think you've got many more customers but perhaps they're ordering lower quantities these days? How has that dynamic changed?

I don't know that it's lower quantities overall. Like when you think about how many customer might need over time, that quality maybe hasn't changed, but when they need it. and what they want that messaging to say. So instead of running tens of thousands to put on a shelf somewhere in inventory, I think we're seeing customers that are ordering hundreds for an immediate event, and then they're able to change that messaging for the next event they have and then change it again for the next one they have versus trying to order 1,000 shirts and they put them on a shelf and say hey, great you joined our company. Here's the shirt that we printed 2 years ago because we print 5,000 of them and this is the shirt you're going to get. It allows them to have that flexibility to change their messaging as time changes and things change in their company.

So taking a kind of a run length that may be the same and they may consume the same, but they'll break it into different lots and therefore have the ability diversion, and obviously, also speed to market, it happens significantly. It's brilliant.

Absolutely. Yes. yes.

Okay. You've taken it. You touched on it briefly. I want to explore it if it's okay with you a bit more. You were running screen in-house on a production basis. So I referenced that it's a bit different than some of the guys. But obviously, from what we saw earlier on, they're still running a lot of their technology, and you've decided to actually outsource significant volumes. Can you share a little bit more about the drivers for that? And then ultimately, the part that Kornit have played in supporting you?

Yes, definitely. Maybe a little bit of the company history. We've always been very big in outsourcing. It's really how the company started. We were a software company and internet company, and we move the market in to screen print or brought that demand to the screen print market. We got into our in-house production a number of years ago, maybe 12 or so years ago, we started doing in-house production, which included some digital. We did that for a number of years. But then as we looked at what we were trying to accomplish for our customers, in the last 18 months, we made a very conscious decision to step back from that in-house production. We closed our facilities and went back to 100% outsourced model. And what that allowed us to do is really focus on what our customers needed. So we got to focus on delivering that excellence and quality to them, building the right programs for them so that we were able to handle that customer relationship and really deliver on all of their needs and helping them create a product that really had that personal expression that they were looking for and allowed our vendors to drive that process from a production standpoint to deliver on that high quality. We made a conscious decision to move into the Kornit platform because it allowed us to standardize across the vendors that we use and ensure that we were able to have terrific quality, great speed, the best production methods, everything that you can want in a production platform and standardize that across all of our vendors. We made a very conscious decision that these are the vendors we're going to seek out are the ones that have the Kornit ATLAS MAX platform that have the Apollo. And we're going try or move towards those vendors and leverage their production capacity and their production skills and expertise.

And we're very grateful that you did, as I'm sure that many of our customers that we've heard from today are also grateful for that as well. And so on that journey to do that, Kornit's kind of been with you quite closely working with you, certainly the guys that are working for me. Can you share a bit more about what that's meant to you and how that's kind of assisted hopefully, on the journey?

Yes, definitely. Yes, I think it's maybe a bit of a different relationship for us and for Kornit as we've started getting into this. Typically, the relationships are Kornit to the vendors, the manufacturers and us to those same people, and we would not normally have a direct relationship like this. But over the last 12 months, we've opened that up and Kornit's has been very receptive to that. And it's helped us as we started looking at how do we ensure that the demand that we're bringing from the market into these producers, into these decorators is the same no matter where we produce it. That's very critical for us as we look at the types of products we're printing and the brands that we're printing for that whether I produced it at Location 1 or location 2 or vendor 1 or vendor 2, that quality, that print, everything is going to look the same, and we can really spread that demand out to wherever it's needed most, and Kornit has been helping us build that as we look at how do we understand color settings and quality and production settings across that production network. I think one of the things I've been very excited about is Qualiset hugely excited to see that coming out into the vendors that we're using. I think that's going to be a game changer in the market, especially if we can see that come to a next level where it's across fleets instead of single machines, that Qualiset is really going to help demand generators like us ensure that we have a high value or high trust value with our vendors that we're using. And that's really important to me right now that if I send it to any vendor,, if I know that they have Qualiset, I can trust that they're going to produce at the highest quality. Their machine will be up to spec. Everything is going to run great. And I don't have to worry about when's the last time they ran setting on this or whatever. I don't have to think about that, they're taking care of that for us, and that's very, very important.

Yes. I think that's really valuable input. And I think also it's critical that what we found on the journey so far with you is that the relationship that we've developed with you is different as you say than perhaps in the past. But equally, the relationship with our customers who are running our technology that it's a 3-way ecosystem that we're building because if we're creating the value for you, then ultimately, everybody is getting that value. So it's quite important for us to make sure that we have that understanding of what we need to do to make you happy. And just finally, where do you see the future? Was the -- what's the next things that we can do or that you're trying to do that we can maybe help you with that is important to enable customer to continue to grow.

Yes. I think the, I mean, the future is very interesting. I think there's so much opportunity here with the creativity that a digital platform like this enables. It's really phenomenal. A few things that I think on our side that as we work with vendors that are very diverse across a wide range of the market, how do we bring our volume there with speed. And one of the things that we're looking for, that we're asking Kornit's help with is a recipe catalog. It's something that right now is not out there in the market. Every decorator that we go to, we're reliant on the recipes that they have for the shirts that they carry and all of those things, and it means we're breaking up our demand across these decorators in a different way. If there were a universal respectively catalog, I think there's opportunity for us to ramp that volume much, much faster into the digital world. So I think that's one of the big things. Also seeing the automation on the Apollo. I mean that is just incredible right now, and it's driving a big part of our growth. to shift that volume from the traditional screen print world into that digital space. I think it's giving the opportunity now as I think many people spoke to this morning already, runs that are in the dozens or even hundreds are becoming much more viable on a digital platform where 5 years ago, that would have been unheard of. And a big shift in the market right there that we're trying to capitalize on with our vendors right now to shift that mid- to low-volume screen print into a digital space. And I think that's good for our customers to because. I know that and anyone who's been in screen print, it's all depending on how many screens you have, right? How many units and how many screens? And how many times have we all probably gone to a customer and said, "Hey, if you did 3 screens, we can get it to you at a better price." But your design really needs 7 screens. And so we're changing our customers, what our customers want based on cost efficiency. Here, on a platform like this, we're able to say, "Hey, you know what, you can create beautiful designs, high-quality, top-tier production without being worried about the cost of what your design looks like, you can have all those colors, you can have the intricacy, you can have the shadows and the half tons and all that, and it comes out beautifully on a machine like this with that vibrancy that it has in the color palette. I think you're going to see that shift in those small- to mid-sized orders that, that automation is going to drive.

I think we're seeing it already, but I think it's a great point. So thank you. Gents, thanks. So I'm hearing speed. I'm hearing agility, creativity, global consistency. Anything else I've missed? has that pretty much captured it? Brilliant. Please put your hands together for Henrik and Dan. Thank you very much, guys. That's great.

All right. So just before lunch, we'll have about 55 minutes break. We'll be here back at 1:00 after lunch. The lunch is in the next room. But before we're going to have lunch, I would like to introduce you to a few people here to the management and a few people from the Board. So you will have an opportunity doing lunch to interact with them, to ask any questions you would like. After lunch, we will come back here, we will have another panel. It's panel more about future technology and future innovations that we are bringing to new markets, footwear and home decor. And then we will have the Q&A session -- open Q&A session. So people you already met Ilan, our President for Americas. You met Chris, our CMO. Guy is our President for EMEA. He's here. Tomer, our President for Asia. Now Danny, Danny our product expert or product, Chief Product Officer, Ayelet our Chief People Officer Kobi, CTO. And David is the new addition to the team. David is managing -- he's the new COO responsible for manufacturing. I'm sure you will have a lot of questions to him how can we increase the number of Apollos, production of Apollos, et cetera, to the delivery, customer success is within his team. And last, I would like to introduce and not least, the 2 Board members that are here with us. Gabi, many of you familiar with Gabi, you're back, the previous CEO; and Steve on the right side, who are all many of you familiar with. So take the time, interact with the team. Have a nice lunch, and we'll come back here exactly at 1:00. Thank you very much. [Break]

Okay. Good. So I hope you had a good lunch. We are in the second half of the event. Hopefully, the webcast is on. And what we're going to do now, we have 2 sessions here. One is about innovation, about future growth engine for Kornit and for the market. One is about home decor. The other is about the footwear market and what we are doing there, exciting things. After that, we will have the Q&A session, about 0.5 hour, 45 minutes of Q&A. And then we'll break the audience to 2 teams and we will go to see and touch the technology, the equipment. And of course, in the evening, we have a great event for all of you together with many, many customers who will have an opportunity to interact with the new customers as well. So I would like to call Tomer. Tomer, our President for Asia Pacific is going to host the next session, Tomer, please.

Thank you, Ronen, and thank you for having us right after lunch. There is nothing like talking about innovation right after lunch. And I'm happy to have this opportunity and share with you today some of our most, I would say, exciting segments that we are looking at in the coming future. And what we'll try to do is we'll try to combine the market readiness and the market maturity with the technology maturity, all together into what we believe is going to be a perfect storm. In order to do so, I need some help from my friends and colleagues. So without further ado, I'd like to welcome Chris again to the stage and Kobi, the CTO, please come and join me. Find your seat. Excellent. So Chris, I'd like to start with you if that's okay. You know what, take a moment. No, no, I can see. I can see. I'd like to start with you if that's okay, and speak about home decor or should we actually call it textile because it's not, when you look at your home, basically, everything is textile, and home textile is also outdoor. And we know that this segment is very diversified, which include a lot of premium applications. And we also know that pigment is probably the best solution for this diversified application within this segment. And I think my question would be what has changed. We've been looking at this segment for quite some time. What has been changed? And why do you think that the time to capture those opportunities is now?

It's a very broad question and you've already kind of touched on a couple of points. I think it's -- first and foremost, I think the market potential that Ronen has shared this morning and we've seen is huge within the home decor space. Home decor doesn't tend to just focus within the home. It's a bit of a misnomer in many ways. It focuses on interior design. It can be also external, it could be UV kind of applications with umbrellas or outside furnishings, but it's a massive, massive market for us. And as you referenced, it lends itself very well to pigment because of our durability because of our wash and rub test, et cetera, and our fastest. And I think we have, as you saw before, from Ronen, we have the best pigment in the industry. So as a result, our technology and we'll come on to more of what differentiates our technology in a little while. But I think for me, what we've heard and seen earlier on around the broader industry of fashion and brands needing the agility, needing the customization, needing the creativity is exactly the same in the home decor space. We all like to have our own look and feel. You choose products which are representative of you own individuality. And up until now, there's not been a significant amount of choice in that area. You tend to go to a shop or a home kind of furniture company, and you tend to have to buy whatever is available there in that whole process of that is whilst design-led initially, it's fundamentally production-led. So materials that are available, fabrics that are available. You speak to any of the interior designers, they have to go and generally find the woven fabrics or the dyed fabrics. And I think that we're finding -- I can tell you that we're finding the change in what we're able to create using our solutions is fundamentally tipping the industry on it's head.

And you see that we are climbing into, upto the value chain with the creators?

Yes. So traditionally, we would work with as Kornit we would look at the supplier. So we would work on the supply chain side of the business. And obviously, if they're not getting the demand from the brands or the designers, then they will continue to do what they're doing in the way that they've been doing it because generally, it works with them in their time. But actually, through the journey of the last year and some of the products that we're sitting on here are a result of that, we started out a journey kind of a year ago, really wanting to create some samples and some fabric designs that we could then equip our sales team globally to be able to engage in the home decor space. In order -- but we didn't want to make it Kornit-led, we needed to make it industry-led because it needed to be relevant and it needed to have a variety of applications, and they need to be design-led. So actually, what we found by partnering with a very world renowned Italian home interior designer was that when we started to put her creativity into the hands of our technology, we pushed things way beyond where we ever thought we would be able to push. And as a result, we pivoted in a way to understand that there's a much bigger play here than we have thought was possible for us as a manufacturer and as a technology manufacturer.

So let's touch on the technology a little bit because the technology has been evolved in the last 2 years. Ronen mentioned the MAX technology. But why do you think that the technology is actually ready today to capture the opportunities you're talking about?

So it's great to have Kobi here because he can talk a little bit more the technology lever a lot more the technology level to me. But from my side, pigment lends itself to the home decor interior design space because it's the robustness that's needed and it also provides the vibrancy. You don't have the challenge your potential challenge of hand feel, et cetera, which is obviously very relevant. But also our creativity you've being able to print on to dark fabrics using our innovative white ink and also creating texture, which is often very important for home decor using our XDI technology. So combining the MAX technology into the home decor space, you create a whole change of design-led opportunities.

Maybe let me jump real quick. I think that when we are thinking about unleashing creativity, mainly, we are looking on the graphical side on the visualization. But think about additional activity is about giving the choice to the creator to discover any type of fabric that exist. Now the only technology that exist out there that actually given a solution for the all variety of fabrics whether it's natural or synthetic it's pigment. And as you said, we are leading the market on that front. On the other hand, the application side is if you think about it 20 years back, we sit on a sofa and then we will throw away after 10 years or so, but everything was changed. We need an anti-stain mechanism and so on and so forth. So we need to adhere into the requirement of the industry on one end to the creators on the other and give a single solution that will provide all the options in the world in order to push the industry forward.

Thank you, Kobi. So Chris, how are we going to bring it to ground.

So I think for me, the major change we saw was the delight and the creativity in the hands of the designers. The ability for them to create a fully integrated look and feel across a variety of fabrics, and I mean a significant variety of fabrics, and we've got a lot of samples here that if you haven't seen yet, you need to have a look because this is a whole range that effectively creates kind of an integrated look and feel with absolute creativity. So there's a theme running through it, but there are multiple different kinds of fabrics and we'll have a look at those in a second. But maybe don't take my word for it. We've got a video that probably will share a little bit better than me. So why don't we run the video and have a look at that. [Presentation]

So I think it says it all, but I will add a couple of points. Many of you may think that the images in there maybe AI created, but I can assure you that the fabrics are here, they're live. You can touch and feel and see them. And actually, the design creativity-led approach on this has just pushed the envelope into many different areas. And we see this being a massive game changer for us. When you partner with rainmakers in the industry that start to endorse your solutions, it just fundamentally shifts the needle. And we have a massive opportunity moving forward with them and with others in the ecosystem that we've created that will actually be a design and creative-led approach, which fundamentally forces the industry to change. And I think for me, that's what's so exciting for us right now.

Thank you, Chris. Thank you very much. And with your permission, I'd like to move to the next topic, which is footwear.

Thanks for the invite on the slide. Get me something [indiscernible].

Everything behind the scene was, Chris, we just forget the picture. That's it.

So Kobi, we have been looking at footwear for quite some time from a market perspective and also a technological perspective. What has changed that now is a time for Kornit?

So I think part of the general message around the theme of today's presentation is actually about MAX technology. when we started many years back, we had a big project for footwear company that understand what is unleashing the creativity and actually approach us. It was on the Gabi's time actually. But we didn't have a sufficient enough technology to meet the standard of the industry. Maybe a word on that, if you think about us meeting the standards of the industry in terms of apparel, meeting screen printing think about that footwear is some sort of an order of magnitude in terms of the requirement for durability, rub resistance and stuff like that. So it took some time for us to be honest. And then with the MAX technology, we started to explore those opportunities. And while doing that, we understand that even the MAX technology is not sufficient enough to do that. But we are running in a CTO office, so we start an exploration dealing with that, and we're obviously looking for opportunity for expansion. And we are talking about a huge market, Huge. And it's a diversified market on one hand, but it's a market that appreciate value added product. So if you think about 2 trends that we didn't really dive into today, which is athleisure trend on one hand and the growth of streetwear, it demonstrates actually that the athletic footwear market as well as the sneakers market is the only one that actually hype in unclear huge value. We are talking about $400 billion to $424 billion market in terms of retail price, which has a real nice gross margin. It's kind of concentrated by the way, with small -- with huge brands but with small amount of fulfillers as well as brands that are mastering this space, and Kornit's looking for the opportunity to address this market. Saying that, we understand that the athletic shoes is the one that holds the highest and most restricted requirements in terms of any attributes that is there and it's the biggest growing market. So we try to understand whether we have the solution. Now this market is actually -- is not involved in so much in the area of unleashing creativity. Most of the investment is actually coming towards area of soles and mid-soles, gestures, position and, let's say, dealing with the health areas and it doesn't change. So we understand there's a huge opportunity here.

These designs are -- people are wearing them today.

Till today, All star my daughter just bought one -- 3 actually, but never mind. Anyway, we looked into this market really heavily. And we are talking about a really label manual work, production, [indiscernible] processes, 120 processes to create 1 upper. I'm not talking about the full shoe which is crazy. Think about it only the decoration itself, the area we are talking about XDi, 4 layers, 3 layers, whatever, we are talking about 120 processes. The 50 out of those is just the screen printing, because they cannot use an identity or path because it's not durable enough. So you see on the right side, the -- how does it look a regular facility, which is maybe 2x a stadium, a football stadium. And there are a lot of different areas in order to create one shoe. So it's a massive play, and this is why it's becoming a profession that we are into many years right now, maybe 3 years, we are exploring into that space. Don't forget, we bought Voxel8 back in the past as we gained a lot of knowledge in terms of the durability and the elements. We need to understand as part of the equipment we rely on in order to test the opportunity on our end, I'll say.

Kobi are there any digital solutions in this area in any shape or form or?

In any space, there is maybe a solution but not this solution due to the fact that everybody is like actually creating some sort of a small models and incorporate in altogether. There are massive operation that all they does, big companies actually like [indiscernible] like [indiscernible] that build divisions that all they do is running the automation in order to advance and reduce the amount of space into that level. So I think that during the last 3 years or so, we obviously mastering the MAX technology, and I'm slightly more advanced because of my position. So we worked on the system, process and next-gen materials. We understand that we need even better solution that any while we will promote Kornit in order to give the best solution to our customer no matter what. So we are on a standard if we will combine the MAX technology together with new polymers, we will be able to meet the standard of the industry and create a footwear digital production solution that will be enabled a different philosophy looking forward on this space.

So this is basically a segment that is desperate for digital transformation. We also have multiple steps that are -- most of them are manual and half of them are screened. And I think it's pretty clear the combination of the 3 elements. But where do we stand or how we are positioned take it forward and start a real digital transformation by Kornit in this segment?

So in that case, we took a slightly different approach. We already engaged with customers. We have foot on the ground, system on the ground that are really between the actual production doing not main drop I think it's proper, but we are really advanced in that space. I think we have a great offering in terms of the look and feel as well as the cost element, we are meeting the target of this market, and we are really in the ballpark. No matter what we will do, it's the first time and I always make some fun about it that when we started the company many years back, people understand more than us what they need in order to sell. And now it's the first time that I run a final together with Chris that brands are coming and knocking on our doors. So it's kind of a various and I think it's a very enjoyable journey. Maybe before I will jump into the next slide, I will just demonstrate one thing that's an afterward, you can see. So we have a lot of designs that required a massive durability enhancement as well as look and feel. So if you think about rub resistance, everybody says they need to meet the screen printing industry. So we are talking about 10 to 20 rub cycles in order to meet those requirements of the apparel market. Now we are talking about 300. We are talking about 125,000 cycles of rub in order to meet something that called Martindale. So I just want you to understand that there is -- anyhow, it's a leapfrog in terms of the technology and the massive opportunity in terms of the market. And now maybe you can see that we are not just stocking, it's really working.

Good reasons to believe.

It's without sound now. Okay. So what you see is actually a machine that prints around 600 small height uppers, anything is actually on demand. You can find whatever or how many we want because everything is digital, coming across from the other side, fully booked and fully organized for being shipped into assembly line and create a new athletic shoes, which is amazing. So maybe I...

And the names on the left, what are the industry standards?

That's not the standards that are slightly different from the apparel market that they required for the footwear, BellyFlex is actually an impact that is your changing and create flexibility. Martindale is delivered with rub element and resistance, both on wet and dry. You can imagine they are actually literally taking sand paper and rub it off in order to see that if you are, I don't know, kicking a ball, nothing will go into the ball side, so it's amazing. So that's work enough. I truly believe that we have an opportunity. And obviously, I would pick the right side in this equation.

Absolutely, thank you, Kobi maybe...

Yes. I'll say just a quick addition to that. I think Kobi referenced the fact that we're kind of working together on this. And one of the great things, I think, that Ronen did earlier this year was actually gave me another opportunity within Kornit. I used to run Europe. And he set me up as the strategic growth kind of business focus. And we have a team of people that work on understanding and engaging on the brand side or the demand side on how we can match their requirements and how we can innovate what they need with the technological advancements that the Kobi's making. And I think that left in hand -- right hand is something that's quite unique in showing us that we've actually got a very, very interesting future, I think, which is very exciting.

Our confidence is when going to be fun, fun, fun.

It must be fun very exciting growth engines for Kornit. I want to thank you, Kobi and Chris for shedding some light on those. And thank you for your attention. Thank you very much.

Thank you, guys. Next up, we're going to do Q&A. For the folks that are in audience, you can just raise your hand and we'll come around with a couple of microphones. And for the folks online, we've got a Q&A box up on the webcast. If you want to throw out questions in there that you might have, and we'll keep it anonymous for that. Lauri? I don't think we need it quicker.

Okay. We'll go first question, Jim Ricchiuti from for Needham. If we could get Jim a microphone, please.

One of the things that you didn't cover today, and I think it's probably on the minds of investors is the relationship with your large customer. And I wonder if you could provide couple of things. Some update on whether that customer is pursuing Apollo, if there's any update there? And also, whether that customer is perhaps moving forward with upgrading their existing fleet to the MAX technology, which some of us have been waiting for?

Yes. So I'll take it. So there's, of course, limitation to what we can disclose here. We have a very close relationship with our global strategic customer. They will be here at the show as well, very important meeting with them at the show. So what I can share with you today is that really recently, in the last 2 weeks. We received a nice order for multiple upgrades for MAX technology. Again, this is just the beginning, but it's a very, very good sign. And we are very pleased that they are starting with this journey. They have hundreds of Atlases the potential to be upgraded to the MAX and the MAX Plus, and we are starting this journey. Hopefully, we'll get many more orders next year. This year, we are also limited with the number of upgrades, but we are starting and those updates will happen during Q3. So we are delivering right now. So this is a very good news. As for the Apollo, of course, they are looking into it. They were part of the development from the beginning. They are very keen to know more about it. They're coming here to look at it once again. We believe that in the future, Apollo will have a great fit for their operation to improve the efficiency and productivity. We talked a lot about labor. We can save a lot of labor as well. So we believe in the future, it will be integrated, but we still don't have specific plan when and how many we hope to start piloting with them next year, but we'll see.

Got it. And just a follow-up question, just with -- again, on the topic of Apollo, I think you talked about 30 systems next year.

Yes.

Can you help us with how the customer concentration might -- what the customer concentration might look like of those 30 systems? Is the focus on getting more systems at some of the key customers that you're working with? Were you looking at a more broader deployment?

It's a very good question. The main priority for us is to go after new impressions. So we won't put a focus is just to replace one technology by another, meaning if a customer would like to move impression from Atlases to Apollo. This will not be the first priority. It might be in the future. Our first priority is to bring incremental impressions and incremental impression also from new markets of screen replacement. . In terms of diversity, we are trying to bring as much diversity we can, both geographically. We will see orders both we already have orders from EMEA, we are about to get orders also from Asia for the Apollo and of course, Americas, both North America, which is a big region for us, but also Latin America, we see potential. There will be a mix between net new screen printers to existing customers. You already had from one of our top customers today from Scott, from TSC, that they are planning on top of the 7 systems that they have. They will have this year. We are in progress installation of those systems, they're planning to add another 10 systems. So they probably will be -- not probably, they are largest installed base of the Apollo, and we are very proud of them, and we are putting a lot of focus to make it very successful. But on top of that, of course, we would like to broaden the customer base.

We'll go next question over here. Greg Palm from Craig-Hallum.

I appreciate all the info today. I thought it was really, really helpful so far. Some of us who have followed the story for a long time have heard the shift from screen to on demand for a long time. So I guess I just want to start with what do you think has changed more recently, what gives you the confidence that now is the time? I mean, is it the culmination of some of the market tailwinds plus the technology? Just would like to dig into that a little bit first, and then I've got a follow-up.

It's a very good question. And I'll start by saying, Kornit was always a company with great vision. But with one focus market, which was customized design. There, we were really excelling. Our technology has had a great fit. And we always was trying to take the technology to the next level. And the best example of taking the technology to the next level was the HD. In 2019, we introduced the HD to the market. And we thought that the HD will open for us the retail market. Apparently, it wasn't good enough. And from -- after a few years, we understood that the technology needs another level of improvement in terms of quality, consistency, durability and we introduced the MAX technology. So why do we believe that now is the market ready? Why the transformation to on-demand, it's going to happen? It's those combinations that we've discussed. From one hand, it's the market, really what we see today and what you heard today from our customers is all about short runs. It's all about time to market. It's all about labor. They are all having the same pain. And the solution for the fulfiller is digital, the solution for the retailers and the brands is how do we bring the products early to the market, how do we reduce the inventory. And there's no other way only to move the on-demand manufacturing. So this is from the market from the technology perspective, the MAX technology and the Apollo, really, it's a game changer. And you heard it from the customer. You see the momentum on the Apollo, just the beginning, but we feel it. Later on, you will see on the both, you will see it tonight, close to 200 customers will be in the event, and you will see the excitement around the technology. And there are things, I think, as a company, we went through childhood pain, growing pain. And every company needs to go through these cycles. In order to improve, you have to go through these cycles. In 2019, we were riding a wave, in 2021 with COVID the wave it was great for Kornit. We didn't feel the pain. Only the pain makes us stronger. And I think that what we have proved to ourselves, to the market, to all of you as we know how to overcome pain. And to be in the situation that we've been in the last 2.5 years, losing money, losing cash, declining in revenues and taking the company out of it and setting clear expectations where and when we are going to deliver on that and being able to deliver, I think this is a proof point that we know where we are heading. And now that the market is opening up, and we have the technology and we have a clear execution plan how to go after the screen market, how to go after the roll-to-roll now is the time, and we feel it. And you will see it today at the show and in the evening.

And how should we think about that opportunity between new customers and the wallet share expansion opportunity with your existing? I think you mentioned 1,100 customers. I know a lot of that is customized design, but presumably a lot are also doing a lot of screen. So comes from a combination of bolt, but who do you focus on? What's the bigger growth driver?

So customized designed, first, most of the 1,100 are customized design. Some of them are doing also screen, but they're using our technology mainly for customized design, one-offs or short runs. The customized design, finally, we see a new momentum there. We see it quite across the board, definitely with the big customers. The utilization is in a different place than what we've experienced in the last 2.5 years. And we start seeing them getting to the cycle of adding more capacity, and we see it already. So this is on the customized design and customized design will continue to grow with us, and we continue to invest in this market with existing customers, and there will be also a new customer in customized design. As you saw in the market -- the market opportunity is much bigger on the screen replacement. It's much, much bigger on the screen replacement. And there is a real need there to change. So some of it is a lot -- we need to put a lot of effort in education of this market. We bought some top talents to our team that are coming from the screen market, that know the market, know the industry and the potential customers. We build the right tools, one of them, of course, is the all-inclusive to reduce the barrier of capital investment. And we believe that the growth that will come will come from one hand, the major core will come from the screen, but also from retailers that changing their business model and moving more vertically.

Can I ask one more? All right. One more just because of the importance of your big global strategic, congrats by the way, on that order. Just to be clear, are you saying it was a small upgrade order to start and you're hoping to get additional orders next year? I just want to make sure we're all clear on what you said?

Yes. So it's a meaningful order. I wouldn't say very small. It's meaningful. It's not as large as the installed base that they have, and we're not getting to numbers, it's a meaningful one. But it's a starting point. And if this will be successful and they will see the expected result as we believe that they will see the expected result. There's a good chance that next year we will see a growing investment in moving to MAX technology.

Okay. Congrats on that. I know a lot of us have been hoping and waiting for that.

Thank you.

Next question to Erik Woodring from Morgan Stanley.

Awesome. Thank you, guys, and thanks for having us out today. So 2 questions. Maybe just to start, Ronen, it was nice that we spent some time on roll-to-roll and DTF. Can you maybe just help us understand the cadence as we think about that long-term growth rate that you guys have outlined, is DTG primarily driving that growth? When does DTF and roll-to-roll become more important for this model? It just seems like that market is gigantic, obviously, what becomes the catalyst for that to become more meaningful for Kornit? And then I have a follow-up.

Yes. So we are not providing a split and we didn't provide a split between DTG and DTF. So I will be careful with what I'm saying in terms of the magnitude. DTG is still a much bigger business because most of the installed base, most of the 1,100 customers are in the DTG. And those are customers that are generating revenues and impressions and continue to grow with us and also the screen market we see is amazing opportunity with Apollo and with the all inclusive. So the market of the DTG will continue to be the main driver of growth, both in terms of dollars, but also where we see today in terms of percentage of growth, okay? The DTF, the direct to fabric or the roll-to-roll business is coming from much smaller installed base that we have today. What we have managed to do in the last few years is to penetrate 2 large fulfillers that we didn't manage to do it before with all the technologies that we have today, the MAX technology on the on the Presto. What is really unique about our technology other than what we talk about the quality and the hand feel is really about the Whiting and the XDi is that many of those fulfiller for the first time can leverage the technology to bring high-value applications. Our solution is being used with those fulfiller, large fulfiller for mainly for high-value applications. It's a giant market. The transformation in this market is still taking time. We still don't see the fast transition from the funnels that we have and the discussion that we have to in orders, many of you have been in ITMA last year. And ITMA was mainly around direct to fabrics and many, many customers, and you all saw it, we're excited about the opportunities and but converting it really to an order required from them to change the entire production floor and time set up of the production. It takes more time. On the other hand, we strongly believe that the impact that Kornit and the fashion industry can make is in this market, because this market is the market that is really polluting, is not sustainable and producing a lot of waste.

Super. And then, Lauri, maybe I'll shoot one to you, which is I know you don't want to guide on an annual basis, and I'm not asking for that. But how do we think about kind of the linearity of growth that you've outlined over the next 4 to 6 years? I mean if you're thinking about mid-teens growth and the expectation you get a 25% EBITDA margins, there's a way to go to get there. And so I guess maybe part of my question is also making sure that expectation don't get too high in the near term, but how do you just want us to think about the linearity of that growth as think out 4 to 6 years and ultimately getting to the goal that you've outlined today?

Okay. So thanks for the question. The way we see it is that we are embarking upon a very important strategic shift. This, as you heard, we are, in fact, self-imposing a limitation on how fast we ramp it. So I think it's fair to say that, that would accelerate in the future, not necessarily in the immediate future. That being said, when we perfect it, which I'm sure we will do so in a short period of time, we will be able to start to show delivery of the margins and EBITDA that we are referring to. And of course, as revenue picks up, those 3 factors will, in fact, as I mentioned before, both the revenue, the margins and the discipline will help us get to that 25% EBITDA.

Lauri, I think maybe a question to follow up on that, that a lot of folks that have been asking today over lunch and just in general, during the breaks is we've talked a lot about today about how the demand is very strong for AIC and there's a lot of interest in the Apollo. If we were to have, let's say, more interest in 30 systems next year, would we be able to ramp up production with the contract manufacturer to deliver, say, 40 systems? Or would that be a 2026 objective?

Do you want to take?

Yes. So, we planned it, the limitation is not in the production, okay? We are dealing with large contract manufacturers, Flex, Sanmina, they potentially can produce almost any numbers that we will ask them. We need to plan for that. We were planning for 2024 to install 15 Apollos and 2025, 30. The rationale behind it, that every system of Apollo that we're installing is like installing 4 to 5 Atlas MAXs in terms of print volume. It's crucial that each one of those installations will be successful, mainly when we are talking on the AIC model, which we are not getting the money in advance. We're getting the money when the customer is producing. So we have to make sure the customer is successful. So we are putting a lot of effort working with the customers and building the customer success organization to be able to deliver. Once we see that this machine of installing ramp-up, making the customer success is going well, and we believe that it will happen during 2025 with the 30 systems that we will install and of course, we can decide to ramp up to any numbers of systems. In terms of the long lead items that we need to orders is taking something between 7 to 8 months for the long lead item to orders and to produce such a system is less than a month to produce the system. So potentially we can really scale it to much larger numbers of units, but this is into 2026.

And another one that came up quite a bit today was just on the chart that we had on cash flow. And I think the question is, when you think about profitability and operating cash flow over the next few years through that initial build-out phase and then into the long-term target. Are we saying that we're committing to profitability through those years and operating cash flow positive through those years and the main impact will be free cash flow? Or could there be years where we dip into negative on EBITDA and operating cash flow?

Okay. Our model is -- I think it's very clear. We are absolutely committed to positive operating cash flow. Throughout this period, the growth investments is what pulls free cash flow. It's a negative point. And we are taking the necessary steps to ensure that, that is what we deliver. With regards to EBITDA, as I said during the presentation, we are committed to achieving positive adjusted EBITDA margin this year. And hopefully, that will continue.

Okay. We've got one more question from the online group. And if anybody else in the audience has something, raise your hand or we'll end with this one. So a question for Ronen. Just clarifying on the AIC opportunity. If a customer is very big and has a strong balance sheet, are there still situations in which AIC makes sense, especially if they've been a digital player in the past?

Yes. So we see today also some big customers and existing customers that would like to move to AIC with new addition of system if it's Atlas MAXs or Atlas MAX Plus or the Apollo, there are cases like this. It's all about capital allocation. In those cases, they believe that they can use the capital for other things, like expansions, like M&As, and they see the value in moving to AIC, while I understand that there might be that the cost per impression is higher, there are other benefits. One of the benefits that we hear from existing customers that are working with us on the AIC is about the partnership. They see as part of the success of the systems, of the solutions, of them going up. This require a totally different DNA and customers understand it. It's not that we are just installing assistance and living. We are really working very, very closely with the customer. There is a benefit for that to those customers. So the answer, short answer to is, yes, there will be customers that now our big customers that will move to AIC for us, it's great because we believe that longer term, it will strengthen the relationship with the customers will provide us with clear recurring revenues from each system will gain more revenue, more profit and more impressions versus the CapEx. And overall, it will provide better profitability to the company.

Back here, we get, Tomer, a microphone. In the pink yes.

Yes. So of the customers that you have that also have screen printing operations, how big is that opportunity for you to convert them from screen to digital? And then among those, how many do you think will convert in the next 5 years? And how much impact do you think the AIC model being offered has increased their willingness to convert sooner rather than later?

It's one way one. Okay. So the first one, you're asking about the installed base. So we mentioned we have 1,100 customers that are in the installed base, how many of them are relevant to screen conversion. So we don't have the exact number, but we estimate around 25% to 30% of those customers are relevant for us in terms of screen conversion. So we have large installed base of customers that are doing only one-offs and they don't have screen operation, but we have at least 25% of our installed base that they have also screen systems that we believe that we can convert them. How many of them we can convert is too early to say. You heard today about T-Formation as an example. We have a few more examples on that of conversion. In the next few days, you will hear some more news about additional customers that are adopting our technology and moving into AIC. So please stay with us for the next few days, you will see some more news coming.

Do you believe then that the AIC model is pushing forward their willingness to convert?

The existing one?

Yes.

Yes. So yes, we also see in the existing customers. And again, let me be very clear on what we are focusing on the existing. We are not trying to move existing customer of one of from existing technology to AIC, okay? We are not moving impression from existing technology to AIC. We are looking at the incremental if a customer has impressions that today is not printing on Kornit, it's printing it on screen machines. This is a really great target for us. And there, we are also proposing the AIC model, and there will be customers that will choose the AIC.

Pass over, Tomer.

Just a 2-part question on the ink plant that you guys built a couple of years ago. What's the utilization there? Have you been suffering some pressure on the margins of materials from underutilization there? Or how should we think about the scaling up of that plant?

So we never share what is the utilization there. I can tell you that it was built to much larger capacity. So while the capacity is growing, we still have -- we are running 1 shift. So we still have 2 or 3 shifts to add on top of that, and we can add more lines in the facility. So the facility is good enough for many years to ahead of us.

Okay. If there's no further questions, I'll pass the clicker back over to you, Ronen, to close that up.

Yes. So I would stand. Okay. So first of all, I would like really to thank you. We didn't finish the day. I would like to thank the audience on the webcast, because for them, we will say goodbye. We are taking this audience staying here to live demonstration of the technology on our booth, both the Apollo and the rest of the technology. And in the evening, we are going to celebrate. So first of all, we'd like to thank the entire audience that on the webcast, our investors our employees sitting there all around the world and looking at it. Thank you very much for being with us, and we'll see many of you soon.