Kornit Digital Ltd. (NASDAQ:KRNT) Q2 2025 Earnings Call Transcript

Kornit Digital Ltd. (NASDAQ:KRNT) Q2 2025 Earnings Call Transcript August 7, 2025

Operator: Greetings, and welcome to Kornit Digital’s Second Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Mr. Jared Maymon, Investor Relations for Kornit Digital. Mr. Maymon, you may begin.

Jared James Maymon: Thank you, Operator. Good day, everyone, and welcome to Kornit Digital’s Second Quarter 2025 Earnings Conference Call. Joining me today are Chief Executive Officer, Ronen Samuel; and Lauri Hanover, Kornit’s Chief Financial Officer. For today’s call, Ronen will provide comments on the second quarter of 2025 and provide an update on our market. Lauri will then review the second-quarter results and provide our third-quarter outlook before we open it up for Q&A. Before we begin, I would like to remind you that forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other U.S. securities laws will be made on this call. These forward-looking statements include, but are not limited to, statements relating to the company’s plans, strategies, projected results of operations or financial condition, and all statements that address developments that the company expects will occur in the future.

Forward-looking statements are subject to known and unknown risks and uncertainties that could cause results to differ materially from those implied by the forward-looking statements. I encourage you to review the company’s filings with the Securities and Exchange Commission, including the company’s annual report on Form 20-F filed with the SEC on March 28, 2025, which identifies specific risk factors that could cause actual results to differ materially. Any forward-looking statements are made currently, and the company undertakes no obligation to publicly update any forward-looking statements, except as required by law. Additionally, the company will be making reference to certain non-GAAP financial measures on this call. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company’s earnings release published today, which is also posted on the company’s Investor Relations website.

At this time, I would now like to turn the call over to Ronen. Ronen?

Ronen Samuel: Good morning, and thank you for joining us. We delivered second-quarter revenues of approximately $49.8 million within our guidance range but below the midpoint. Gross margin was 46.3% and adjusted EBITDA margin came in at negative 2.3%. While service and consumable revenues were softer than expected, system sales and our all-inclusive click business model continue to drive growth. Q2 marked modest year-over-year revenue growth of 2%, bringing total first-half growth to approximately 5%. During the quarter, we increased our annual recurring revenues by $4 million, reaching approximately $19 million, which is a clear reflection of our progress in building a more predictable and resilient Atlas business. Service revenues declined year-over-year, primarily due to a fewer Atlas MAX upgrades, which had contributed meaningfully to service revenue in the comparable period of 2024.

While overall consumer sentiments remain relative soft, which continues to affect our customer appetite for new capital investment, we are seeing consistent and encouraging growth in production across our installed base. Impression grew 5% to $222.7 million on a trailing 12-month basis, with strong double-digit growth among our top customers in both the DTG and roll-to-roll segments. Despite this increase in impression, Q2 consumable revenues declined year-over-year, largely due to the lingering impact of October 7 war, which led several key customers to significantly increase in inventory in late 2023 and early 2024. In the first half of this year, those customers adjusted their inventory approach and began drawing down existing stock, temporarily reducing replenishment activity.

We expect this to normalize in the second half of the year. Our strategy remains sharply focused, driving impression growth across our customized design installed base while accelerating our penetration into the screen market by transforming analog workflows to digital and capturing net new impressions in bulk apparel. The opportunity ahead is significant, and we are executing with discipline and intent. In the customized design segment, momentum is continuing. These customers, many of whom have partnered with us for years, continue to increase utilization of their systems, translating into higher throughput and stronger productivity. This quarter, we saw clear examples of capacity expansion across our installed base. Cimpress, a global leader in mass customization, added the second Apollo system, along with 3 additional Atlas MAX Plus units, to their large fleets of Kornit systems, reinforcing both their confidence in our technology and their intent to scale globally.

T-Shirt & Sons in the U.K., part of PF Concept Group, added a second Apollo as well to their Poland site under AIC, building on their growing Atlas MAX fleet. Snuggle in the U.K. added multiple Atlas MAX Plus systems to their growing fleet of Atlas MAX as a response to strong demand and consistently high performance. Another exciting addition is Flashship Print, a net new digital customer that joined our installed base with 1 Apollo and 2 Atlas MAX Plus systems under the AIC model. On top of that, our global strategic customer placed a follow-on orders to expand their MAX technology deployment across several sites, further validating the value they see in our platform. While many long-standing customers continue operating under our traditional CapEx model, new customers are increasingly adopting AIC as a way to align cost with production and scale more efficiently.

We expect this model to remain a key driver of growth as both utilization and footprint expand. In parallel, we are making strong progress in the screen printing market, which is a critical pillar of our long-term growth plan. This segment, long dominated by analog, is starting to embrace digital solutions, driven by the need for shorter lead times, labor efficiency, and the ability to profitably handle mid- to short-run jobs. Our Atlas MAX Plus and Apollo systems, especially under the AIC model, are now opening doors to customers who just a year ago would not have considered digital a viable alternative. A standout example is Promos, one of the largest screen printers in the U.S., serving major brands and national retailers. They installed their first Atlas MAX Plus just 6 months ago, expanded to 3, and added an Apollo under AIC in Q2, with more Apollo’s units now in discussion.

We are also seeing strong adoption from new screen customers globally. In the U.K., Basic Thinking installed an Apollo under AIC. In Quebec, Printeez adopted 2 Atlas MAX Poly systems focused on performance sportswear. And T-Shirt Factory in the U.K. added 2 Atlas MAX Plus units under AIC to replace screen. These are just a few examples of how traditional screen printers are turning to Kornit to modernize their offering and stimulate growth. This rapid expansion and growing confidence from analog players is a powerful validation of our technology, business model, and strategic direction. Looking at production across these accounts, we are seeing a clear increase in net new impression for bulk apparel. Many jobs now fall within the 250 to 500 unit range, and we are seeing more runs produce well above 1,000 units, which were volumes unreachable for digital before the Apollo and the Atlas MAX Plus.

The screen market pipeline continues to build with most deals aligned to the AIC model. Midsized players are adopting Atlas MAX Plus and Atlas MAX Poly, while larger customers are deploying Apollo or combining both platforms to address broader range of application and run length. Our value proposition is clear, better total cost of ownership, superior print quality, and unmatched agility. These customers are already seeing measurable improvements in productivity, flexibility, and economics. To accelerate this momentum, we are investing in application development automation, print quality, and ASC offerings designed for longer-run production and large-scale operators. While the transformation is underway, adoption in the screen market is progressing at a measured pace.

Bulk apparel remain a highly established analog-driven segment, and shifting production model takes time. That said, it is far the largest opportunity in front of us with a massive installed base ready for disruption. Kornit is uniquely positioned to lead this shift. We are in the midst of paradigm shift. The strength of our customer relationship, expanding pipelines, and differentiated technology position Kornit at the forefront of the analog-to-digital transformation in the screen market. Apollo, Atlas MAX Plus, Atlas MAX Poly, and our AIC model together create a powerful foundation for long-term disruption and market leadership. We also made meaningful progress this quarter in expanding into new verticals with additional systems being installed at key footwear customers across China, Vietnam, and Europe.

Each of these customers is adopting Kornit’s technology to meet the specific demands of mass market sports footwear production, which demonstrate the scalability and adaptability of our technology across regions and use cases. In parallel, we are advancing breakthrough innovations for functional applications and plan to unveil new capabilities later this year that will open entirely new high-value markets where Kornit has not previously participated. We also signed a strategic development agreement with one of the world’s top sports brands to co-develop a proprietary application, leveraging our unique functional technology. While details remain confidential for now, this partnership highlights the increasing relevance of our technology for global brands looking to innovate, design, and deliver with speed, sustainability, and agility at the core.

Looking ahead to the second half of the year, we expect modest top-line growth of low single digit while further expanding our ARR base and setting the stage for a meaningful growth in 2026. We are executing against a defined plan, scaling Apollo, accelerating ASC adoption, strengthening our screen market funnel, and maximizing utilization across global installed base. At the same time, we are maintaining tight operational discipline, continuing to target full-year adjusted EBITDA profitability and positive cash flow from operations. In addition, we’re actively managing potential impact from the recently announced 15% tariff on products originating from Israel. While we do not expect a material effect on our financials, we have developed mitigation strategies and cost-saving initiatives to minimize any impact.

In closing, we remain confident in our strategy and our ability to deliver on our long-term goals. We are in the midst of a profound transformation. On-demand sustainable digital production is no longer a future vision. It is happening now. Our value proposition is clear. Our strategy is aligned with long-term industry trends, and we have intense focus on execution. While this change takes time, we are building a healthier, more resilient, and more scalable business with the right technology, the right model, and the right team in place. Thank you for your continued support. Now I’ll turn the call over to Lauri. Lauri?

Lauri A. Hanover: Thank you, Ronen, and good day to everyone. Second quarter revenues were $49.8 million at the low end of the guidance range of $49 million to $55 million we provided in May. Year-over-year, we saw growth in product revenues, largely attributable to an increase in system sales and the continued expansion of our AIC program. Growth in systems and AIC was partially offset by a decline in consumable sales, largely reflective of customers returning to more normal levels of inventory after last year’s buildup in the wake of tensions in the Middle East. Service revenue declined year-over-year due mainly to fewer Atlas MAX upgrades as expected. Moving to margins. Second quarter non-GAAP gross margin was 46.3% compared with 48.6% in the same period last year.

The year- over-year decline in gross margin was primarily the result of the lower sales of consumables and Atlas MAX upgrades. Looking at operating expenses. Total second quarter non-GAAP operating expenses were $26.7 million, a decrease of $1.2 million or about 4.4% from $28 million in the same period last year. We continue to manage operating expenses closely and plan to deliver positive adjusted EBITDA on a full-year basis in 2025. For the second quarter, adjusted EBITDA was negative $1.2 million. This was an improvement versus the negative $1.6 million we reported in the same period last year. Adjusted EBITDA margin for the second quarter of 2025 was negative 2.3%, within the guidance range we provided in May. Our balance sheet remains robust with our quarter-end cash balance, including bank deposits and marketable securities, standing at $489 million.

Operating cash flow was $3.7 million compared with $4.5 million in the same period last year. Cash flow less capital expenditures and investment in equipment on lease for AIC in Q2 was negative $2.1 million, which was in line with our plan. This compared to positive $3 million in the same period last year. Moving to our share repurchase activity. During the second quarter, we completed our $100 million accelerated share repurchase program, which ran subsequent to our initial $75 million plan announced in 2023. Through a mix of an accelerated share repurchase and a traditional open market repurchase, we purchased approximately 3.6 million shares at an average price paid of $28.1 per share. Repurchases during Q2 specifically were 758,000 shares at an average price paid of $22.67 per share.

This brings our total repurchases since 2023 to 6.7 million shares for a total consideration of $164.8 million, reflecting an average price paid of $24.54 per share. Ending with our third quarter guidance. We currently expect third quarter revenues to be between $49 million and $55 million and adjusted EBITDA margin to be in the negative 3% to positive 3% range. I’ll now turn it back over to Ronen to open the call for Q&A.

Ronen Samuel: Thank you, Lauri. Operator, please open the call for Q&A.

Q&A Session

Operator: [Operator Instructions] And we will take our first question from Greg Palm with Craig-Hallum.

Gregory William Palm: I guess I’d like to just start with maybe some kind of broader commentary relative to what we talked about back in May. I don’t know if it’s easier to sort of break down the sort of the new implied second half outlook by segment. But just kind of curious kind of what’s changed? How much of the maybe more subdued outlook is inventory destocking? How much is system sales or at least placements shipping to 2026, less upgrade orders? I don’t know, maybe just a little bit more color on all that.

Ronen Samuel: Yes. Thanks, Greg, for the question. I will start by saying we are in the mid of transforming our company, both in terms of technology, in terms of the market that we are serving, in terms of the customer base, our go-to-market, and business model. While Q2 results came below where we expected, although within the guidance that we gave to the market, this was reflected due to softness in some areas, but we also see a very positive sign in other areas, which I will touch probably later on, on this call. I actually would like to start with areas that we saw some softness in Q2 and to explain them. First of all, in Q2, in primarily driven from lower-than-expected ink and service revenue. This, despite a very strong growth that we saw in system sales, actually, system sales doubled versus last year, and a strong growth in the AIC revenue.

So we saw a soft and actually decline revenue in ink and services. Let me explain from where is it coming. In the ink revenue decline, this is due to the inventory buildup that was done by a few customers in late 2023, a few key customers, much of which was consumed during the first half of 2025, and they didn’t order much of ink. And therefore, we saw a decline on this revenue. This is more of a technical correction versus any fundamental issues on the ink because we see an increase of impression across our installed base. In terms of the service revenue decline, this decline came mainly due to fewer Atlas MAX or MAX upgrades compared to the same period last year, which was very strong in terms of upgrades to the MAX platform. We expect when looking ahead for ink and services to normalize in the second half of the year, in the second half of this year.

Additionally, we need to remember that a portion of the ink and service revenue is now embedded within the growing ARR or the AIC revenue that now is embedded within our product category. So we differentiate between the growth that we see on the ink line to the AIC. So this is the main impact in terms of the softness of Q2. A few more points that I would like to mention, which is relevant to what we’ve seen in Q2. One is about Apollo system shipment, which currently are tracking below what we were intending to ship this year. This is mainly due to the longer sales cycle and particularly with net new customers from the traditional screen market. As you know, this year, we are focusing very much to take the Apollo to net new customers. Each one of those Apollo, most of the installation of the Apollo are going to net new customers, and this takes longer in terms of implementation, but also longer sales cycle.

We are actively building lighthouse accounts. I mentioned a few lighthouse accounts in my prepared notes. And some of them will, of course, influence those lighthouse accounts will demonstrate Apollo performance and reduce the fear factor of switching to digital from other screen printers. And we believe that this will accelerate the growth of the Apollo moving forward. We have a very strong pipeline for the screen market and specifically for the Apollo, and we believe that this will be a major growth engine moving forward. The third point that I would like to mention is regarding the ARR. And it’s currently the ARR that we reported close to $19 million, but it’s tracking below our expectation. And it’s primarily due to slower-than-anticipated rollout and adoption of the AIC model.

And it’s coming from different area. Launching the AIC required really a shift in mindset, both internally within Kornit, but also educating our customers about this model, especially in this year that we are selling both CapEx and AIC, and we need to meet the CapEx revenue. So even inside Kornit, we are debating which deal we should drive into CapEx deal versus AIC. Moving forward, you will start seeing that our focus is increasingly shifting towards AIC first engagement. And this model is — will gain traction with new deals that we will sign and many more that we have right now in the pipeline, particularly within the screen segment. We expect that our ARR exiting in 2025 will be meaningful for the beginning of 2026 to deliver a momentum and meaningful growth in 2026.

So I was trying, Greg, to cover those areas that were relative softer from what we internally expected to deliver. There are many areas of strength and growth, and I’m sure that I will touch on them later on in other questions.

Gregory William Palm: No, that’s very helpful. Appreciate the color. And I mean just on the ink, I’m kind of surprised that it’s taken this long to see an impact. So I’m curious how many months of inventory would a customer typically have on hand? And again, just kind of thinking back to when you saw the initial kind of stockpiling, why is it taking sort of this long? Like what’s changed more recently where all of a sudden, they’re destocking now, versus why didn’t they do it 6 or 9 months ago?

Ronen Samuel: Yes. First of all, we need to understand that in specifically a few key large customers, okay? And usually, those key customer — large customers are keeping inventory between 2 to 3 months. What we have seen in late 2023 and H1 2024, they have increased their safety inventory into about 6 months of inventory. And we were assuming that they will consume along 2024, but they have decided to change their inventory level only in beginning of 2025 and gradually now reducing their inventory and starting to replenish it into, again, back into 2 months or 3 months of inventory. This takes time, and we saw the impacts specifically in Q2. We assume that most of the impact is behind us. There will be continued some impact in H2.

Operator: And our next question comes from Chris Moore with CJS Securities.

Christopher Paul Moore: This is Will on for Chris. You’re targeting 30 Apollos in 2025. How many do you already have orders for? And how concentrated is the customer base on that 30?

Ronen Samuel: Yes. So as I mentioned before, we are very, very encouraged by the feedback that we are receiving from the Apollo and bringing the Apollo and installing it in net new customers. However, we are tracking below the 30 system targets that we put in front of ourselves. And I’m not going to provide more detail on that in terms of numbers. But what I’m going to say is that what we see right now is that we see more and more customers adopting their second systems. Of course, we have customers that are having already 7 systems and planning to place more systems very soon. But more and more customers are placing their second system. When we are monitoring those systems, we really see that many of them running long runs, many jobs above 1,000, while most of the jobs are between 250 to 500.

Those are ranges that have never been seen in digital before. Those are all incremental volumes to Kornit and showing that our value proposition and the Apollo itself is the right fit to the market. During the first year of the Apollo, of course, we worked heavily in making sure that the product utilization and stability is in best of class. We see a lot of improvement. We have some work to do ahead of us as well, but we are fully confident that these products, including the MAX product line of Atlas MAX and Atlas MAX Poly, will change a market that we’ve never been there. The screen market for the first time, and this is happening only this year, we are penetrating. We’ve never been there before. This market — the addressable market is 5 billion impression below the 1,000 run.

Just to remind everyone, our customers today are doing something like 220 million. This is a massive growth potential. We have the right technology. We have the right business model with the all-inclusive click. Now we have the right go-to-market with the right team to really go and change, transform this market into digital.

Christopher Paul Moore: And could you add any color to what you roughly expect the mix to be for FY ’25 between systems, consumables, and services? And will it be much different in FY ’26?

Ronen Samuel: So I don’t have it exactly in front of me. I can try to go back to you later on to all of you. But what I can say is like this, first of all, what we see, we see a massive, and this is part of the good news, a massive change in system shipment and revenue from system. Actually, when you look at system, we doubled the revenue on system and we doubled the number of systems that we have shipped to the market. Some of it because of the CapEx, some of it because of the AIC model. This is a very important indicator for the future growth of impression and the growth of Kornit. So you should assume that the portion of the system is starting to get bigger, although still the ink is massive. Of course, the AIC is trending very, very strongly up.

And we believe that the ARR that we will end 2025 will be very meaningful for the growth into 2026. Other thing that we see and help you as well, we see a significant penetration into the screen market. You will see there by penetrating the screen market is both in terms of new systems, because most of them or all of them are new customers, but you will see a massive growth on the ink and on the AIC in each one of those installations. A lot of it is related to Apollo. We also see a recovery in the customized design, which you will see the implication on the ink revenue moving forward. We see impression growth in the customized design in many of our customers, strong double digit. And many of them are adding additional systems. I mentioned Cimpress as an example.

Cimpress is a global strategic customer added another Apollo and 3 Atlas MAXes to a very large fleet of addresses that they already have. It’s just one example of the customized design that’s growing very rapidly right now. We see the pipeline both for the screen and the customized design are growing. And the most encouraging that we have is that the model that we just launched about a year ago, the AIC model is gaining massive traction. This is a game-changer for the industry. We are the only one that’s providing it. And we see that it’s open almost every door and customers adopting it, and this will be one of the main vehicles of growth and penetration into the screen market moving forward.

Operator: And our next question comes from Jim Ricchiuti with Needham & Company.

James Andrew Ricchiuti: I’m trying to reconcile your comments that ARR is tracking below expectations, but that you expect to exit the year with much stronger ARR, which presumably is going to contribute to stronger growth in 2026. So what are you seeing or anticipating that really contributes to that view?

Ronen Samuel: First of all, everything is against expectation. So in 1 year, from the moment we’ve launched the AIC program, we announced today that we have already $19 million of ARR. And we are starting to have a more meaningful revenue from AIC every quarter. And of course, H2 is in front of us, and we have a pipeline to increase the ARR further. So you should see a meaningful increase during 2025, and we will start the next year with ARR that actually everything is revenue already for the beginning of the year. And what we see why we believe that this growth continue. First of all, we have a pipeline. We see the funnel is getting stronger. It took us a while as a company to really change the DNA to understand deeply what does it mean the AIC and to balance between the CapEx deal to the AIC.

Remember that we still need to deliver the revenue on a quarterly basis on system, while the ARR is more longer-term. But as I mentioned, we are driving the company into more of an ARR business. And we see that the adoption of the AIC model is now not only within the net new customer in the screen market, but also some of key customers in the customized design, existing customers when they want to expand adopting this model, which is fantastic to see the gap between us.

James Andrew Ricchiuti: Maybe just shifting to the Atlas MAX upgrade business. I’m wondering how we should be thinking about that upgrade business in the second half, just given the order you noted from your global strategic account. Are you anticipating that more skewed toward Q3 in preparation for higher utilization in Q4?

Ronen Samuel: Yes. So first of all, most of our installed base already been upgraded to Atlas MAX. Now we are very busy to upgrade most of our installed base to Atlas MAX Plus. It’s true that our global strategic customers started to upgrade their installed base last year in Q4, and we were anticipating to know when they will continue. And now I’m coming and mentioning that we got a PO for continuation of the upgrade for their — some of their installed base, which is a very good sign of believing in our technology and in our platform moving forward. Those upgrades will be part of Q3 and Q4 revenues and implementation during the second half of the year. It’s already embedded in the comments that I said that we expect H2 to grow by low single digit in H2. Of course, it will contribute to the revenue from the service — for the service business.

James Andrew Ricchiuti: If I could just slip one quick one in. How many customers do you feel have adjusted their inventory levels going back to what you referenced earlier?

Ronen Samuel: It’s only a few, which we believe that we have an impact. It’s less than a handful of customers, but some of them are very meaningful without getting into more detail.

Operator: And our next question comes from Brian Drab with William Blair.

Brian Paul Drab: I’m just wondering, first of all, some of these larger deals that have been — that were in the works earlier in 2025, I think some of that got pushed out. You said the sales cycle is longer. Do you have visibility, Ron, into some of those deals may be happening in 2026? Or these customers just delayed decisions and are likely probably going to come back to the table and close some of these deals once they figure out where they want to put machines, et cetera. Can you talk about that a little bit?

Ronen Samuel: Yes. But before that, I just want to emphasize once again, if you look at the systems line by itself, both in terms of revenue and in terms of number of systems that we are shipping, we actually doubled the number of systems that we are shipping in the revenue versus last year, okay? So we see a very good momentum. While we would like to see more and some of it related to the AIC, what we found out that what we need to do is really shorten the time between the funnel development to closing the deal, and to the implementation. On the screen market specifically, what we identify as a barrier really to get the acceleration is to have more Lighthouse across the world. And we are very much focusing on building those lighthouse-like promos, just 8 months back or 6 months back, installed 1 Atlas MAX.

Now they have 3-plus Apollo and very soon, hopefully, more Apollo. This will be a lighthouse in North America. And the same thing will be a lighthouse in U.K. with Basic Thinking and more and more. And by that, we’ll spread the confidence in the screen market that not only we have the right quality, the right productivity, the right automation, but the TCO and those customers are successful. So it’s taking time to do this transformation of an industry. This industry, many of those accounts that we are knocking on the door never heard about Kornit. The perception about Kornit is that Kornit is digital and not relevant for longer run. And only when we sit with them and showing them the technology, the ROI, the total cost of ownership, then they’re realizing that they have a massive opportunity to change and to improve their business.

This takes time, but it’s going now to accelerate because we are gaining momentum, we are gaining experience, and the rumors is starting to spread in the market.

Brian Paul Drab: And I guess I’ll ask just a little more directly. There was one customer that had — at one point, you’re talking a couple of quarters in a row about they have 7 Apollos, more Apollos than anyone. Can you talk about — I think you said they could take on 10 more Apollos. Where are we with those 10 Apollos?

Ronen Samuel: Yes. So this customer, he mentioned that they’re planning to take 10 more Apollos and we hopefully that they will do it. I cannot get to the specific their business. There were some changes moving to one new site. I cannot get into more details than that. But what I can say is that those 7 Apollo’s performances are incredible, incredible performances, running around the clock 24/7. They are super pleased with the performance. They are great partners, and they will go — we are going to grow together moving forward.

Brian Paul Drab: And then — can you comment at all on whether you’re seeing — are your customers commenting on whether they’re increasingly possibly motivated by the big bill that was passed here and the accelerated depreciation associated with that? And could that result in any activity before year-end?

Ronen Samuel: Yes, definitely. It’s very relevant for our North America business. Our North America team is engaged with many customers that see it as an opportunity. And of course, this will move some of the deals from AIC into CapEx, but it’s great for the customer. It’s great for us. It’s great for the economy. So it’s definitely going to influence also H2. We still don’t have clarity on how many additional deals we are going to gain from it, how many deals it’s going to accelerate, but it’s a positive indication to the capital markets.

Operator: [Operator Instructions] And we will take our next question from Erik Woodring with Morgan Stanley.

Erik William Richard Woodring: This is Maya on for Erik. You’ve talked a lot about the success you’re seeing with screen printing customers. Can you maybe quantify that for us a little bit more? How much revenue comes from these customers? I understand it’s largely Apollo-based, but what they’re buying? And what kind of revenue or impression growth did you see from them? And as we look into the second half, how does this change at all?

Ronen Samuel: Yes. I’ll try to give you some colors on this market. This market is new to us. We are learning a lot every day. There are different types of customers. There are the giant ones, like the Promos, and there are smaller ones that we are penetrating. Usually, the small ones, the way we — sorry, the way we are dealing with those customers is to try to understand the business. What is the volume that they have that they can move to digital? How much of the volume below 1,000 copies they have on an annual basis? And therefore, we are trying to fit the right solution to their volume. So many of the small customers, they don’t have enough volume to justify to have an Apollo. And therefore, we see a very nice adoption for the small and mid-sized screen printers for the Atlas MAX and the Atlas MAX Poly.

The big one, usually, they have enough volume to justify more than one Apollo. And some of them will start actually with Atlas MAX to learn about the technology, and later on, we’ll add Apollo, and then we’ll continue to go with the Apollo. The automation is very, very important. And the tendency is to go with the Apollo, but some of them, as they are risk-averse, will start with the Atlas MAX. What we’re also learning is that we need to adapt our AIC model to the different types of customers. For example, there are many screen printers which are running their business differently from the customized design customer. Customized design customer as their mind is on demand, usually working almost 24 hours, at least 2 shifts. Many of the screen printers are working only 1 shift.

And even if they are a big customer in 1 shift, the commitment that they need to give for the Apollo AIC is putting them on in a high risk, they see it in a high risk if they can reach to that. So we are now working on adjusting our AIC model to fit also those customers that are running only 1 shift and not running 2 shifts. We’re also adjusting our AIC model to motivate customers to run longer runs. So they will see cost per impression on longer runs lower than if they’re running shorter runs. So there is a massive opportunity here. I can tell you that every door that we are knocking is opening up and serious discussion. The only thing — the main thing that we need to clear is the fear factor because many of them are analog, traditional analog, and this is the first time that they are touching digital.

And there is a fear factor. And to overcome it, we need, first of all, to spread the rumour in the market about the success that we have, about the qualities that we have, about the productivity. We need to create those lighthouses. So the team is very much focused on that. And I’ve been in previous life in those transformation of industry in the print market, it’s happening, and screen market will move to digital. It’s not an exception. It will move to digital. It’s a matter of time. And now we’re accelerating it with our AIC, which is a very unique proposition to this market, which will make it much easier and reduce the risk for those customers to move to digital.

Erik William Richard Woodring: And then one last one for me. Trailing 12-month impressions were up about 5% year-over-year. That’s a deceleration from what we saw in 1Q. Obviously, we don’t have a lot of history. But why are impressions slowing? And how does this trend differ by customer segment? Are you seeing stronger growth in one area of the market versus another?

Ronen Samuel: Excellent point, Maya. First of all, I mentioned in my script already that we see many of our installed base are growing strong double digit. And our top customer, the 20 top customers, most of them are really growing very, very strong. So then you ask yourself, how come it’s only 5% on trailing 12 months. So let me explain. It’s a bit complex, but listen carefully. As Lauri mentioned last quarter in her prepared remarks, the impressions are in 2 ways. For customers that connected to our Connect system, we track the actual impression printed in real time. So this is accurate. However, we have customers for those that are not connected to Connect, and the way we are calculating it, and within those customers, there are a few big customers, we are estimating impression by translating the ink shipments into an average consumption rate, okay?

So we are translating how much shipments of ink that took this quarter and translating into impression. Specifically in Q2, this method was impacted by lower ink shipment because of the issues of October 7 that I mentioned before. This is a temporarily — this temporarily reduced the estimated impression, even though that actually production remained very steady and the growth is much more than the 5% that we have mentioned.

Operator: And it appears that there are no further questions at this time. I will now turn the program back to Mr. Samuel.

Ronen Samuel: Okay. So thank you very much for being on the call. My last comment is while we are still in a transition phase, we are confidently building a stronger, more resilient, more profitable growth business for mid- and long term. Our technology, customers win pipeline, and business model are laying the foundation for leadership in both customized design and the large-scale digital transformation of the screen market. We have confidence in our positioning to drive meaningful growth in 2026, not only in the customized design, but also in the massive opportunity of digitizing the screen printing market. Thank you very much, and hope to see you soon.

Operator: Thank you. This does conclude today’s presentation. Thank you for your participation. You may disconnect at any time.