Tavy Rosner: Yes, just about the model, like should we expect a similar seasonality in 2024?
Ronen Samuel: Yes. We, in fact, let me correctly, you’re asking if we expect to see revenue from the model in 2024?
Tavy Rosner: Yes. Like, will you see a more back-end loaded type of year similar to what we did in 2023?
Ronen Samuel: It was difficult to hear you. Can you repeat the question, please? Is it for the model? The overall model of specific [indiscernible]?
Tavy Rosner: Yes, just the revenue growth, we should expect similar seasonality in ’24 compared to ’23?
Ronen Samuel: Yes. So in terms of 2024, you will see very similar seasonality across the quarter. Q1 is the lowest quarter in terms of supplies and system sales. You will see stronger Q2 and H2 will be much stronger than H1, both from ink perspective and a system perspective. In the same way, you will see an improvement on our EBITDA and profitability across the quarter. While we gave a guidance of negative EBITDA in Q1, we’re expecting Q2 to be closer to breakeven and H2 to be profitable on EBITDA.
Operator: [Operator Instructions] Our next question comes from the line of Jim Ricchiuti with Needham & Company.
Jim Ricchiuti: Lauri, I want to make sure I heard you correctly. You’re saying that you’re expecting modest growth for the year in 2024?
Lauri Hanover: We’re — yes, that’s what we said. We — you can expect modest revenue growth.
Jim Ricchiuti: Got it. And so maybe it would be helpful to understand what may go into that outlook? So for instance, should we — what are the expectations, for instance, with your large global customer in terms of new equipment purchases or upgrades? And again, I understand you can’t be specific, but it would be helpful in terms of how to think about that. The contribution from Apollo, sounds like you’re expecting some meaningful revenues, although is it fair to say that comes in more in the back half of the year?
Ronen Samuel: Okay. So first of all, let me refer to the modest revenue growth. And let me explain from where is it coming. So when we say modest revenue growth, we have three major parts in our P&L on the revenue. One is ink, services and systems. Income system, we have a relative very high visibility and predictability. So we expect ink to continue to grow year-over-year. We had a very strong year in 2023, and we expect it to continue to grow also in 2024. We have a very good visibility, and we see how Q1 tracking as well. On service, we have also a very good visibility because a major part of the service is recurring revenue and some other parts are orders for upgrades like the MAX upgrades that we discussed before. We have a good visibility in service.
We believe that will continue to grow as well in 2024. Where we have a relative lower visibility is on system sales. Now some parts of systems sales, we have good visibility, like the Apollo. As I mentioned, we already know who will be the customer for 2024. We are working with them. So the Apollo is one part of it. We have better view also on the direct-to-fabric. Some on the athleisure. But still, we have our pipeline. We need to build it. And some of it, we are planning to build during FESPA event and the main event that we have. So at this stage, still a lot of work to do to build the pipeline on the systems. But overall, we believe that we are going to see a modest growth on overall revenue for 2024. As for our global strategic customers, of course, we cannot get into their purchasing plans for 2024.
What I can tell you is that we are working very closely with them. We have a very good visibility where they are heading. I mentioned that the peak season was strong for them. Without getting into too much details and overall 2023 is strong. And I believe that they will continue to grow in 2024 per the plan. As for the upgrades that I mentioned on previous call, we still didn’t get the PO decision if they’re going ahead in 2024 of upgrading the fleet to the MAX, and if yes, how many of them. We still are under discussion, and we will see once we will have more information, material information, we will share with you. There was another part — and you had another…
Jim Ricchiuti: The other question I had was just as it relates to Apollo, and I do have another follow-up. Apollo, should we assume that the scale up on the revenue on Apollo is more skewed more towards the second half of the year? Or do you see Apollo being a contributor throughout the year? I know you have some revenue in Q1, obviously.
Ronen Samuel: Yes. So you will see some — of course, you will see revenue in Q1 and Q2, but it’s correct to assume that more revenue will — from the Apollo, you will see in H2 of this year.
Jim Ricchiuti: Got it. And the follow-up just with respect to this recurring revenue based model of this revenue model, is there’s — it’s a 5-year contract, minimum impressions per year. Presumably, that scales up each year. Is that fair to say?
Ronen Samuel: No, it’s a minimum volume per year that the customer needs to achieve, and it doesn’t change from year-to-year. It’s a minimum, but we expect the customer will buy additional systems and grow between the years.
Jim Ricchiuti: And it’s mainly geared run into the Apollo. It would seem like this would also lend itself this model to other products, I guess, including the direct-to-fabric business? Is this potentially a template for you looking out a couple of years?
Ronen Samuel: So right now, as I mentioned, we are starting with the Apollo and it’s at pilot. We will learn a lot from it. And of course, we are looking to leverage it if it will be successful to other products and other segments. It can be very successful. It can be very profitable. It can open new markets for us. It’s a very strong stickiness with our customers. Those customers that we are speaking with about it are very excited. Some of them in the end decided to go on CapEx and not the OpEx once they see the full cost of the OpEx. But for the other, it’s very, very attractive. So it depends on the customer. And this is part of the innovation that Kornit is bringing, Kornit bringing innovation, not only on the technology, a lot of innovation in marketing, but also innovation on the business model.
We are taking it step by step, and we are starting only with these products and limited number of customers. We will learn from it and then we’ll roll it out — we’ll decide how to roll it out to other products.
Jim Ricchiuti: Can you say how many customers?
Ronen Samuel: Right now, we have one customer running in this model, and we expect to have a few more in the next few months.
Operator: Thank you. As there are no further questions, I would now hand the conference over to Jared Maymon for closing comments.
Jared Maymon: Thank you all very much for your time today. As always, should you have any questions, please feel free to reach out directly. And operator, you can close the call.
Operator: Thank you. The conference of Kornit Digital has now concluded. Thank you for your participation. You may now disconnect your lines.
