Kornit Digital Q2 2025 Earnings Report

Kornit Digital EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.02
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.02

Kornit Digital Revenue Results

• Actual Revenue: $49.75 million
• Expected Revenue: $52.07 million
• Beat/Miss: Missed by -$2.31 million
• YoY Revenue Growth: +2.50%

Kornit Digital Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 8:30AM ET

Kornit Digital (NASDAQ:KRNT) develops, designs, and markets digital printing solutions for the fashion, apparel, and home decor segments of printed textile industry in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally. Its solutions include digital printing systems, ink and other consumables, associated software, and value-added services. The company's products and services include direct-to-garment printing platform for smaller industrial operators to mass producers; NeoPigment ink and other consumables; QuickP designer software; and system upgrade kits, maintenance and support, consulting, and professional services. It serves decorators, online businesses, brand owners, and contract printers. Kornit Digital Ltd. was incorporated in 2002 and is headquartered in Rosh Haayin, Israel.

Kornit Digital Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Q2 revenues of $49.8 million were at the low end of guidance with just 2% Y/Y growth and an adjusted EBITDA margin of –2.3%, missing the midpoint.
• Positive Sentiment: Annual recurring revenues rose by $4 million to approximately $19 million, marking progress in building more predictable and resilient recurring income.
• Positive Sentiment: System sales doubled year-over-year and trailing-12-month impressions grew 5% to 222.7 million, driven by strong double-digit growth among top DTG and roll-to-roll customers.
• Negative Sentiment: Consumable revenues declined as key customers drew down ink inventories built up in late ’23 and early ’24, though management expects this destocking to normalize in H2.
• Positive Sentiment: Looking ahead, Kornit forecasts low single-digit H2 revenue growth, aims for full-year adjusted EBITDA profitability and positive cash flow, and has strategies to mitigate a new 15% Israeli tariff.

Presentation

[Operator]

Greetings, and welcome to Kornit Digital's Second Quarter twenty twenty five 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 Maeman, Investor Relations for Kornit Digital. Mr. Maeman, you may begin.

[Jared Maymon, Global Head - IR at Kornit Digital]

Thank you, operator. Good day, everyone, and welcome to Kornit Digital's Second Quarter twenty twenty five Earnings Conference Call. Joining me today are Chief Executive Officer, Ronen Samuel and Lori Hanover, Kornit's Chief Financial Officer. For today's call, Ronen will provide comments on the 2025 and provide an update on our market. Lori will then review the second quarter results and provide our third quarter outlook before we open it up for Q and A.

[Jared Maymon, Global Head - IR at Kornit Digital]

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.

[Jared Maymon, Global Head - IR at Kornit Digital]

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 03/28/2025, 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, CEO & Director at Kornit Digital]

Good morning and thank you for joining us. We delivered second quarter revenues of approximately $49,800,000 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 continued to drive growth. Q2 marked modest year over year revenue growth of 2%, bringing total first half growth to approximately 5%.

[Ronen Samuel, CEO & Director at Kornit Digital]

During the quarter, we increased our annual recurring revenues by $4,000,000 reaching approximately $19,000,000 which is a clear reflection of our progress in building a more predictable and resilient recurring 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 relatively 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 222,700,000 on a trailing twelve 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, which led several key customers to significantly increase ink inventory in late twenty twenty three and early twenty twenty four.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 impression in bulk apparel. The opportunity ahead is significant and we are executing with discipline and intent. In the customized design segment, momentum is continuing.

[Ronen Samuel, CEO & Director at Kornit Digital]

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. SIMPRESS, a global leader in mass customization added the second Apollo system along with three 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 and Sons in The UK, part of concept group, added a second Apollo as well to their Poland site under AIC, building on the growing Atlas Max fleet. Snagger in The UK added multiple Atlas Max plus systems to the growing fleet of Atlas Max as they response to strong demand and consistently high performance.

[Ronen Samuel, CEO & Director at Kornit Digital]

Another exciting addition is flagship print, a net new digital customer that joined our installed base with one Apollo and two 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 costs 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 Pomos, one of the largest screen printer in The U. S, serving major brands and national retailers. They installed their first Atlas Max Plus just six months ago, expanded to three and added an Apollo under AIC in Q2, with more Apollo units now in discussion.

[Ronen Samuel, CEO & Director at Kornit Digital]

We are also seeing strong adoption from new screen customers globally. In The UK, Basic Thinking installed an Apollo under AIC. In Quebec, Printers adopted two Atlas Max Poly systems focused on performance sportswear. And T shirt factory in The UK added two 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 two fifty to 500 unit range, and we are seeing more runs produced 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. Mid sized 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 lens. Our value proposition is clear, better total cost of ownership, superior print quality and unmatched agility.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 apparels 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

Kornit is uniquely positioned to lead the 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 customer across China, Vietnam and Europe.

[Ronen Samuel, CEO & Director at Kornit Digital]

Each of these customers is adopting Kornit's technology to meet the specific demands of mass market spot footwear production, which demonstrate the scalability and adaptability of our technology across region 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

We are executing against a defined plan, scaling Apollo, accelerating AIC adoption, strengthening our skin 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 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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, we'll turn the call over to Lori. Lori?

[Lauri Hanover, CFO & Director at Kornit Digital]

Thank you, Ronen, and good day to everyone. Second quarter revenues were $49,800,000 at the low end of the guidance range of $49,000,000 to $55,000,000 we provided in May. Year over year, we saw growth in product revenues, largely attributable to an increase 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.

[Lauri Hanover, CFO & Director at Kornit Digital]

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 $26,700,000 a decrease of $1,200,000 or about 4.4% from $28,000,000 in the same period last year.

[Lauri Hanover, CFO & Director at Kornit Digital]

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 $1,200,000 This was an improvement versus the negative 1,600,000 we reported in the same period last year. Adjusted EBITDA margin for the 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 $489,000,000 Operating cash flow was $3,700,000 compared with $4,500,000 in the same period last year. Cash flow less capital expenditures and investment in equipment on lease for AIC in Q2 was negative 2,100,000 which was in line with our plan.

[Lauri Hanover, CFO & Director at Kornit Digital]

This compared to positive $3,000,000 in the same period last year. Moving to our share repurchase activity. During the second quarter, we completed our $100,000,000 accelerated share repurchase program, which ran subsequent to our initial $75,000,000 plan announced in 2023. Through a mix of an accelerated share repurchase and a traditional open market repurchase, we purchased approximately 3,600,000.0 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.

[Lauri Hanover, CFO & Director at Kornit Digital]

This brings our total repurchases since 2023 to 6,700,000.0 shares for a total consideration of $164,800,000 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 $49,000,000 and $55,000,000 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 and A.

[Ronen Samuel, CEO & Director at Kornit Digital]

Thank you, Laurie. Operator, please open the call for Q and A.

[Operator]

Certainly. And we will take our first question from Greg Palm with Craig Hallum. Please go ahead.

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Yes, thanks. 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 placement shipping to 2026, less upgrade orders, I don't know, maybe just a little bit more color on all that.

[Ronen Samuel, CEO & Director at Kornit Digital]

Yes. Thanks, Greg, for the question. I will start with 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 area, which I will touch probably later on, on this call.

[Ronen Samuel, CEO & Director at Kornit Digital]

I would actually would like to start with areas that we saw some softness in Q2 and to explain them. First of all, in Q2, in the 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 a decline revenue in ink and services. Let me explain from where is it coming.

[Ronen Samuel, CEO & Director at Kornit Digital]

In the ink revenue decline, this is due to the inventory buildup that was done by few customers in late twenty twenty three, few key customers, much of which was consumed during the 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, the second half of this year. Additionally, we need to remember that the 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

So we differentiate between the growth that we see on the incline to the AIC. So this is the main impact in terms of the softness of Q2. Few more points that I would like to mention, which 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 installations of 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 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 feel factor of switching to digital from other screen printers. And we believe that this will accelerate the growth of the Apollo moving forward.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 $19,000,000 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 requires really a shift in mindset both internally within Kornit, but also educating our customer about this model. Especially in this year that we are selling both CapEx and AIC and we need to meet the CapEx revenue.

[Ronen Samuel, CEO & Director at Kornit Digital]

So even in Insight Ponit, 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 will gain traction with new deals that we'll sign and many more that we have right now in the pipeline, particularly within the screened segment. We expect that our ARR exiting in 2025 will be meaningful for the beginning of 2026 to deliver momentum and meaningful growth in 2026. So I was trying, Greg, to cover those areas that were relatively 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.

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

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, like, how many months of inventory would a customer typically have on hand? And again, just kind of thinking back to when you 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 they're destocking now versus why didn't they do it six or nine months ago?

[Ronen Samuel, CEO & Director at Kornit Digital]

Yes. First of all, we need to understand that specifically few key large customers, okay. And usually those key customer, large customer are keeping inventory between two to three months. What we have seen in late twenty twenty three and H1 twenty twenty four, they have increased their safety inventory into about six months of inventory. And we were assuming that they will consuming along 2024, but they've decided to change their inventory level only in 2025 and gradually now reducing their inventory and starting to replenish it into again back into two months or three months of inventory.

[Ronen Samuel, CEO & Director at Kornit Digital]

This takes time and we saw the impacts specifically in Q2. We assume that most of the impact is behind us. There will be continue some impact in H2.

[Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay, understood. All right. Thanks for the color.

[Operator]

Thank you. And our next question comes from Chris Moore with CJS Securities. Please go ahead.

[Will Gildea, Equity Research Associate at CJS Securities]

Hi, this is Will on for Chris. You're targeting 30 APOLAS in 2025. How many do you already have orders for and how concentrated is the customer base on that 30? Thank you.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 self. 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 that we see more and more customers adopting their second systems. Of course, we have customers that are having already seven systems and planning to place more systems very soon, but more and more customers are placing their second system.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 job are between two fifty to 500. Those are range that never been seen in digital before. Those are all incremental volume 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

We have some work to do ahead of us as well, but we are fully confident that these products, including the MAX products line of Atlas MAX and Atlas MAX Poly will change a market that we 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 5,000,000,000 impression below the 1,000 run length. Just to remind everyone, our customers today are doing something like $220,000,000.

[Ronen Samuel, CEO & Director at Kornit Digital]

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.

[Will Gildea, Equity Research Associate at CJS Securities]

Thank you.

[Analyst]

And could you add any color to what you roughly expect the mix to be for FY twenty twenty five between systems, consumables and services?

[Will Gildea, Equity Research Associate at CJS Securities]

And will it be much different in FY 2026?

[Ronen Samuel, CEO & Director at Kornit Digital]

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 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 cornea.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 things 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 system, 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 SIMPRESS as an example. SIMPRESS is a strategic customer, added another Apollo and three Atlas Maxes to a very large fleet of Atlas that they already have.

[Ronen Samuel, CEO & Director at Kornit Digital]

It's just one example of the customized design that's growing very rapidly right now. We see the pipeline both for 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 providing it. And we see that it's open almost every door and customer adopting it, and this is will be the one of the main vehicle of growth and penetration into the skin market moving forward.

[Will Gildea, Equity Research Associate at CJS Securities]

Thank you.

[Operator]

Thank you. And our next question comes from Jim Ricchiuti with Needham and Company. Please go ahead.

[James Ricchiuti, Senior Analyst at Needham & Company]

Thank you. Ron, I'm trying to reconcile your comments that ARR is tracking below expectations, but then 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

[Ronen Samuel, CEO & Director at Kornit Digital]

So first of all, everything is against expectation. So in one year, from the moment we've launched the AIC program, we announced today that we have already $90,000,000 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'll start the next year with ARR that actually everything is the 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 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 customer in the customized design, existing customer when they want to expand adopting this model, which is fantastic to see the between us.

[James Ricchiuti, Senior Analyst at Needham & Company]

Okay.

[James Ricchiuti, Senior Analyst at Needham & Company]

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, CEO & Director at Kornit Digital]

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 some of their installed base, which is a very good sign of believing in our technology, in our platform moving forward. Those upgrades will be part of Q3 and Q4 revenues and implementation during the second half of the year.

[Ronen Samuel, CEO & Director at Kornit Digital]

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 Ricchiuti, Senior Analyst at Needham & Company]

Okay. 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, CEO & Director at Kornit Digital]

It's only few, which we believe that we have an impact, it's less than a handful of customer, but some of them are very meaningful without getting into motive.

[James Ricchiuti, Senior Analyst at Needham & Company]

Enough. Thank you.

[Operator]

Thank you. And our next question comes from Brian Drab with William Blair. Please go ahead.

[Brian Drab, Co-Group Head - Industrials at William Blair]

Hi, good morning or good evening, I guess, in your case. Thanks for taking the questions. 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 Ronan to some of those deals maybe happening in 2026 or these customers just delayed decisions and likely probably going to come back to the table and close some of these deals once they figure out where they wanna put machines, etcetera. Can you talk about that a little bit?

[Ronen Samuel, CEO & Director at Kornit Digital]

Yeah, 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 final development to closing the deal and to the implementation. On the screen market specifically, what we identify as a barrier really to get acceleration is to have more lighthouse across the world. And we are very much focusing on building those lighthouse, like promos, just eight months back or six months back installed one Atlas Max, now they have three plus Apollo and very soon, hopefully more Apollo, this will be a lighthouse in North America.

[Ronen Samuel, CEO & Director at Kornit Digital]

And the same thing will be a lighthouse in UK 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 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. Their 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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

[Brian Drab, Co-Group Head - Industrials at William Blair]

Okay, thanks. I guess I'll ask just a little more directly. There was one customer that had at one point you're talking a couple quarters in a row about, know, they have seven APOLLOs, more APOLLOs than anyone. Can you talk about, I think you said they could take on 10 more Apollos, like where are we with those 10 Apollos?

[Ronen Samuel, CEO & Director at Kornit Digital]

Yes, so this customer, he mentioned that they were planning to take 10 more APOLLOs, and we hopefully that they will do it. I cannot get to specific their business, there were some changes of moving to one new site, I cannot get into more detail than that, but what I can say that those seven Apollos performance are incredible, incredible performance, running around the clock 20 fourseven. They are super pleased with the performance. They are great partners, and they will go we are going to go together moving forward.

[Brian Drab, Co-Group Head - Industrials at William Blair]

Okay,

[Brian Drab, Co-Group Head - Industrials at William Blair]

And then can you comment at all on whether you're seeing or 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, CEO & Director at Kornit Digital]

Yes, definitely. It's very relevant for North America business. North America Teams is engaged with many customers that see it as an opportunity. And of course, this will move some of the deal 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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.

[Brian Drab, Co-Group Head - Industrials at William Blair]

Okay. I'll follow-up more later. Thank you very much. Thank you.

[Operator]

Thank you. And we will take our next question from Eric Woodring with Morgan Stanley. Please go ahead.

[Maya Neuman, Equity Research Associate at Morgan Stanley]

Hi, thank you. This is Maya on for Eric. 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?

[Maya Neuman, Equity Research Associate at Morgan Stanley]

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, you know, how does this change at all?

[Ronen Samuel, CEO & Director at Kornit Digital]

Yeah, 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 one, like the Promos, and there are smaller ones that we are penetrating.

[Ronen Samuel, CEO & Director at Kornit Digital]

Usually the small ones, 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 feed the right solution to the volume. So many of the small customers, they don't have enough volume to justify to have an Apollo.

[Ronen Samuel, CEO & Director at Kornit Digital]

And therefore, we see a very nice adoption for the small and mid size screen printers for the Atlas Max and 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 intent is to go with the Apollo, but some of them as they're will start with Atlas Max. What we're also learning is that we need to adapt our AIC model to the different type of customers. For example, there are many screen printers, which are running the business differently from the customized design customer.

[Ronen Samuel, CEO & Director at Kornit Digital]

Customized design customer, as the MiSight is on demand, usually working almost twenty four hours, at least two shifts. Many of the screen printers are working only one shift, and even if they are big customer, in one shift, the commitment that they need to give for the Apollo AIC is putting them in a high risk, they sit 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 one shift and not running two 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's a massive opportunity here.

[Ronen Samuel, CEO & Director at Kornit Digital]

I can tell you that every door that we are knocking is opening up and seriously 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're touching digital. And there is a fear factor, and to overcome it, we need first of all to spread the women 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.

[Maya Neuman, Equity Research Associate at Morgan Stanley]

Great. Thank you. And then one last one for me. Trailing twelve month impressions were up about 5% year over year. That's deceleration from what we saw in 1Q.

[Maya Neuman, Equity Research Associate at Morgan Stanley]

Obviously, we don't have a lot of history. But you know, why are impressions slowing and you know, how does this trend differ by customer segment? Are you seeing stronger growth in one area of the market versus another?

[Ronen Samuel, CEO & Director at Kornit Digital]

Excellent point, Meyer. 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 customer, most of them are really growing very, very strong. So then you ask yourself, how come it's only 5% on trailing twelve months? So let me explain.

[Ronen Samuel, CEO & Director at Kornit Digital]

It's a bit complex, but listen carefully. As Lori mentioned last quarter in her prepared remarks, letting the impressions in two 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 customer for those that are not connected to Connect, and the way we are calculating it, and within those customers, there are few big customers, we are estimating impression by translating the ink shipments into an average consumption rate, okay?

[Ronen Samuel, CEO & Director at Kornit Digital]

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

[Maya Neuman, Equity Research Associate at Morgan Stanley]

Great. Thank you so much.

[Operator]

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

[Ronen Samuel, CEO & Director at Kornit Digital]

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 constantly 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.

[Ronen Samuel, CEO & Director at Kornit Digital]

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.

Participants

Executives

• Jared Maymon, Global Head - IR
• Ronen Samuel, CEO & Director
• Lauri Hanover, CFO & Director

Analysts

• Greg Palm, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Will Gildea, Equity Research Associate at CJS Securities
• Analyst
• James Ricchiuti, Senior Analyst at Needham & Company
• Brian Drab, Co-Group Head - Industrials at William Blair
• Maya Neuman, Equity Research Associate at Morgan Stanley