Kornit Digital Ltd. ((KRNT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Kornit Digital Ltd. recently held its earnings call, revealing a strategic focus on transitioning to a recurring revenue model and expanding into new markets. The sentiment was largely positive, with emphasis on operational efficiency and market expansion, although there were concerns about short-term revenue impacts due to the transition from CapEx to the All-Inclusive Click (AIC) model, as well as challenges with gross margins and exchange rates.
Revenue Growth
Kornit Digital reported third-quarter revenues of $53.1 million, marking a 5% growth year-over-year. This growth is a positive indicator of the company’s ongoing efforts to enhance its financial performance and market presence.
Expansion of All-Inclusive Click (AIC) Model
The AIC model has shown promising results, with annual recurring revenue reaching $21.5 million by the end of the third quarter, an increase of $2.6 million sequentially. This model is expected to continue scaling, providing a stable revenue stream for Kornit.
Positive Cash Flow
Kornit Digital has successfully generated positive cash flow from operations for the eighth consecutive quarter, underscoring the company’s financial stability and efficient operational management.
Footwear Market Expansion
The company has made significant strides in the footwear market, launching a digital footwear solution that has already produced over 1 million pairs of shoes. With a total addressable market of about 1 billion pairs annually, this expansion represents a substantial growth opportunity.
Strong Demand for Apollo Systems
Kornit’s Apollo systems have seen rapid production scaling, with early users averaging over 1 million impressions annually. Notably, 40% of Apollo and Atlas MAX systems sold were to new customers, indicating strong market demand and customer acquisition.
Gross Margin Decline
The non-GAAP gross margin declined to 45.8% from 50.3% in the same period last year, primarily due to inventory-related adjustments and U.S. tariff costs. This decline highlights some of the financial challenges the company faces.
Exchange Rate Impact
The appreciation of the Israeli shekel negatively impacted operating expenses and adjusted EBITDA, presenting a challenge in managing international financial operations.
Shift from CapEx to AIC Revenue Model
The transition from CapEx deals to the AIC model has delayed some revenue recognition, impacting short-term revenue growth. However, this shift is expected to benefit the company in the long term by providing a more predictable revenue stream.
Forward-Looking Guidance
Looking ahead, Kornit Digital anticipates revenues between $56 million and $60 million for the fourth quarter, with an adjusted EBITDA margin of 7% to 10%. The company expects modest top-line growth in 2026, driven by the continued expansion of recurring revenues. Kornit aims to capture 5% of the screen printing sector’s 6 billion impression addressable market by 2030, further solidifying its market position.
In conclusion, Kornit Digital’s earnings call highlighted a strategic shift towards a recurring revenue model and market expansion, with positive indicators of growth and operational efficiency. Despite some challenges with gross margins and exchange rates, the company’s forward-looking guidance suggests a promising outlook for future growth and profitability.