Kornit (KRNT) Q1 2026 Earnings Transcript

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DATE

Wednesday, May 13, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ronen Samuel
• Chief Financial Officer — Assaf Zipori
• Global Head of Investor Relations — Andrew Backman

TAKEAWAYS

• Total Revenue -- $48.5 million, reaching the upper end of management’s guidance range.
• Adjusted EBITDA Loss -- $2.8 million, with EBITDA margin of negative 5.8%, an improvement of approximately 260 basis points year over year.
• Non-GAAP Gross Margin -- 41%, down from 45.2% the previous year, with a 190 basis point decrease attributed to FX movement and tariff-related costs.
• Non-GAAP Operating Expenses -- $25.5 million, marking a 7% decline year over year despite a $2 million unfavorable FX impact.
• Operating Cash Flow -- $6.3 million, reflecting the 10th consecutive quarter of positive operating cash flow.
• Share Repurchases -- $30 million in shares repurchased during the quarter, totaling approximately 9.1 million shares and $200 million since 2023 inception of the program.
• ARR (Annual Recurring Revenue) -- $27 million at quarter end, after adding approximately $2.1 million during the quarter.
• AIC Revenue Growth -- Increased approximately 103% year over year, evidencing expansion of the As-A-Service model.
• Impressions Growth -- Trailing 12-month impressions rose by approximately 12%, signaling higher system utilization.
• System Sales Mix -- Roughly 40% of system sales were to new customers, with about 65% sold to traditional screen printing customers focused on long-run production.
• Q2 Guidance -- Revenue projected between $51 million and $55 million; adjusted EBITDA margin expected between negative 5% and breakeven.
• Pipeline and Backlog -- Management cited a robust backlog and pipeline supporting continued growth and increased visibility through the second half of the year.
• Innovation Highlights -- Kornit introduced the ATLAS MATRIX and Presto Max Plus platforms; customers cited “extremely positive” feedback and early order momentum at recent industry events.
• Print Factory Acquisition -- Kornit announced a definitive agreement to acquire Print Factory, strengthening software workflow and automation capabilities; expected to close in the second quarter.
• Legal Settlement -- Kornit reached an agreement in principle to resolve a prior class action lawsuit, with settlement costs mostly covered by insurance.

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RISKS

• Non-GAAP gross margin declined year over year due in part to “FX movement related to the shekel strengthening as well as certain tariff-related costs,” reducing margins by approximately 190 basis points.
• Management acknowledged that “strengthening of the shekel creates some pressure,” noting ongoing FX headwinds affecting cost structure and profitability.
• Kornit’s second quarter profitability guidance accounts for “continued investments in strategic initiatives, including Connections 2026 as well as some ongoing FX pressure from shekel strengthening.”

SUMMARY

Kornit Digital Ltd. (NASDAQ:KRNT) reported first quarter revenue of $48.5 million, citing growth in both product and service lines and expansion of its recurring revenue businesses. Management confirmed that AIC revenue grew approximately 103%, and ARR reached $27 million, as the company accelerated its transition to a recurring revenue model. Kornit also highlighted robust order momentum for its new ATLAS MATRIX and Presto Max Plus platforms, both supporting entry into new addressable markets. The planned acquisition of Print Factory will bolster workflow automation and digital infrastructure, in line with Kornit’s broader strategy to become a leading platform for on-demand and scaled manufacturing in the textile industry.

• Management indicated that initial ATLAS MATRIX upgrades and shipments will generate revenue starting in the second quarter, with the majority of upgrade activity expected in the third quarter and early fourth quarter.
• Kornit’s Connections 2026 event directly resulted in new orders and expanded its sales pipeline, with many orders from new customers and a strong expectation for conversion in the second half of the year.
• Over 90% of new customers from the targeted screen market segment are now adopting Kornit’s AIC model, which management claims enhances predictability and long-term gross margin through higher print volumes per customer.
• Asaf Zipori stated the company maintains flexibility in ongoing share repurchases, with $100 million authorized and execution dependent on capital allocation priorities, including organic growth and M&A.
• Ronen Samuel reported that sales cycles are shortening, especially for AIC-model transactions, and that new customers in mass production applications are often rapidly scaling deployments post-initial system adoption.
• Management identified significant potential in categories such as camouflage, footwear, and home decor, with ongoing pipeline development and early stage customer testing in each segment.

INDUSTRY GLOSSARY

• AIC (All-Inclusive Click): Kornit’s recurring revenue “as-a-service” model, charging customers based on usage rather than equipment purchase, with bundled support, consumables, and maintenance.
• Impressions: The count of individual textile items printed using Kornit systems, serving as a proxy for utilization and recurring sales of consumables.
• Atlas MAX, Atlas MAX Plus, Atlas MATRIX: Kornit’s direct-to-garment and direct-to-fabric printing platforms with evolving capabilities for higher productivity and diverse substrate compatibility; ATLAS MATRIX introduces multi-fiber flexibility including polyester.
• Presto Max Plus: Kornit’s roll-to-roll digital textile manufacturing solution designed for performance, technical, and specialty applications, emphasizing automation and fabric versatility.
• Carbon Shield: Kornit’s proprietary technology enabling high-quality digital printing on polyester fabrics while preventing dye migration, recently incorporated in the Atlas MATRIX platform.

Full Conference Call Transcript

Ronen Samuel, Kornit's Chief Executive Officer; and Asaf Zaari, our Chief Financial Officer. For today's call, Ronen will share his overall commentary on the first quarter, followed by Assaf, who will review our first quarter 2026 results and provide our guidance for the second quarter 2026 before we open up the call for Q&A. Before we begin, I would like to remind you that forward-looking statements within the meaning of the 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 and financial condition and similar statements regarding the company's expectations for the future.

The fulfillment of forward-looking statements is subject to known and unknown risks and uncertainties. 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 26, 2026, 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 them, 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 like to turn the call over to Ronen. Ronen?

Ronen Samuel: Thank you, Andy, and good day, everyone. Q1 was a strong start to the year and a clear proof point that our strategy is translating into execution and measurable results. We delivered revenues of approximately $48.5 million at the high end of our guidance with adjusted EBITDA loss of $2.8 million and continue to generate positive operating cash flow for the 10th consecutive quarter. We are seeing continued strong impression growth with trailing 12 months year-over-year growth of approximately 12%, driven by higher utilization across our installed base and the ongoing shift from screen to digital. Momentum is being driven by both new and existing customers.

Approximately 40% of our system sales in the first quarter came from new customers, while approximately 65% were to traditional screen printing customers, primarily targeting long-run production environments. At the same time, relatively new customers are already expanding their fleets after seeing the operational and economic benefits of digital production. Together, these trends reinforce the shift from analog to digital manufacturing. As an example, Promos Inc., who become a Kornit customer just last year, expanded its Apollo and ATLAS MAX fleet with multiple ATLAS MAX Plus systems through Kornit AIC platform. The company is also beta testing our newly unveiled ATLAS MATRIX platform.

Another example is Printers, a high-volume Canadian screen printer focused on sports and athleisure, which expanded its ATLAS MAX Poly fleet with multiple ATLAS MAX Plus systems during the first quarter. The company has also committed to upgrade all its systems to ATLAS MATRIX platform, including its planned expansions into the U.S. market. Our pipeline and backlog continued to strengthen, improving visibility into Q2 and the second half of the year and reinforcing our confidence in the business momentum. In the first quarter, we added ARR of approximately $2.1 million, ending Q1 with about $27 million in ARR.

Based on our signed backlog, advanced pipeline and customers already committed to AIC, we expect a meaningful step-up in ARR in Q2 with continued acceleration throughout the second half of the year. A few weeks ago, we hosted Connection 2026, which was a defining moment for Kornit and for the industry. We had close to 600 participants, including hundreds of existing customers and a strong mix of new prospects, brands, retailers, fulfillers and solution partners. The energy and feedback around our vision, strategy and solutions was extremely strong. Connections is becoming much more than an event.

It is evolving into a platform where the industry comes together to shape the future of on-demand production and demonstrates Kornit's leadership in that transformation. What becomes very clear during the event was that the industry is accelerating towards agile demand-driven manufacturing models and customers are actively looking for technologies and integrated platforms that can reduce inventory risk, improving speed to market and drive more sustainable production. At Connections, we demonstrated Atlas Metrics for the first time, and the response exceeded our expectations. Customers immediately recognize the breakthrough value of a single platform capable of producing across cotton, polyesters and blends with industrial scale quality, durability, consistency and efficiency.

Powered by our unique Carbon Shield technology, Matrix addresses one of the industry's biggest challenges, enabling high-quality digital production on polyester fabrics while preventing die migration. a critical limitation that has constrained digital apparel printing for years. This breakthrough significantly expands our addressable market into polyester, sportswear, performance apparel and other high-growth segments, opening new applications and production opportunities for our customers. Customers and partner feedback has been extremely positive, and we are already building a meaningful backlog of new and upgrade orders, reinforcing Atlas Metrics potential to accelerate the transition from analog to digital production across a much broader portion of the market.

We also showcased Apollo in live production environments, demonstrating the level of automation, throughput and consistency required to address bulk and mid-run production at scale. For the first time, we demonstrated production on cut pieces using Apollo, opening new market opportunities in applications and workflows that historically were difficult to automate digitally at scale. The response from customers looking to replace analog screen printing was very strong, reinforcing the significant market opportunities ahead of us. In parallel, we announced the acquisition of Print Factory, a strategic transaction that significantly strengthens our software workflow and production automation capabilities. What we are seeing more clearly now is that digital production is no longer limited to short-run customization.

It is increasingly moving into scaled manufacturing environments. Print Factory is already deployed across thousands of production sites globally, bringing advanced color management, workflow automation and production control capabilities that are becoming increasingly critical in scaled digital manufacturing environments. More importantly, Print Factory accelerates our long-term strategy to build the connected digital infrastructure for the textile and apparel industry, connecting demand generation, workflow, production and fulfillment into one scalable ecosystem. Customers increasingly recognize that the future of production lies in intelligent connected platforms, not just hardware. Very few companies in the industry can bring together production systems, workflow, automation, consumable and fulfillment connectivity into a single integrated offering the way Kornit can.

Following Connection, we continue to build momentum at text process in Frankfurt, where we introduced and demonstrated Presto Max Plus for the first time. Interest levels were extremely high, particularly in the footwear, technical apparel, camouflage, performance wear, home decor and other high-performance applications. And we are already seeing a growing pipeline of opportunities and orders for the new platform. Presto Max Plus represents another important expansion of our addressable market, bringing Kornit's digital production capabilities into entirely new categories and applications. Powered by our new DuaTech architecture, the system delivers exceptional durability and print performance on demanding fabrics and applications that historically were impossible to address with digital production.

Combined with our advanced vision system and intelligent production capabilities, Presto Max Plus brings a new level of automation, consistency and production control to roll-to-roll digital textile manufacturing. Customer feedback around print durability, fabric flexibility, sustainability and the ability to eliminate traditional pre- and post-processing steps was extremely positive. Taken together, these developments reinforce the strength of our innovation pipeline, the breadth of our platform and the momentum we are building across products, customers and markets, positioning Kornit well to capture the growing shift towards on-demand production. Looking ahead, the momentum we built in Q1 continues to strengthen into Q2. Our Q2 guidance reflects the continued progress and execution we are seeing across the business.

In addition, our growing pipeline, backlog and customer activity are providing us with better visibility and confidence as we look towards the second half of the year. We also remain disciplined on cost. While the strengthening of the shekel creates some pressure, we are taking the right actions to manage our cost structure and protect profitability as we scale. Stepping back, over the past 2 years, we focused on stabilizing the business, strengthening our foundation and redefining our strategy.

Today, we are seeing the results through a stronger product portfolio, expansion into new markets and applications a growing recurring revenue model through AIC and a clear position as the technology and platform leader, enabling the shift towards on-demand manufacturing at scale. Most importantly, we are executing consistently and building the foundation to scale and grow from here. With that, I will turn the call over to Assaf. Assaf?

Assaf Zipori: Thank you, Ronen, and good day, everyone. Total revenues for the first quarter were $48.5 million at the top end of our guidance range. Revenue performance in the quarter reflected year-over-year product and services growth of 4% and 7%, respectively, supported by growing customer activity and expansion across our installed base. AIC revenue continued to grow strongly year-over-year, increasing approximately 103% compared to the first quarter last year. We ended the quarter with approximately $27 million in ARR and entered Q2 with a strong backlog, pipeline and customer activity level, supporting our confidence in continued sequential growth in both AIC revenue and ARR throughout the year.

As Ronen discussed, impressions, a strong leading indicator of system utilization and consumables demand grew by approximately 12% year-over-year on a trailing 12-month basis, supported by continued utilization across our installed base and the ongoing shift from screen to digital production. Moving to margins. First quarter non-GAAP gross margins was 41% compared to 45.2% in Q1 2025, mainly reflecting a higher mix of systems and services relative to consumables, driven primarily by normal seasonality patterns in the business. As a reminder, our business typically sees strong consumables demand and utilization levels in the second half of the year following normal season patterns.

Compared to Q1 2025, gross margin was also affected by FX movement related to the shekel strengthening as well as certain tariff-related costs during the quarter, which together reduced gross margins by approximately 190 basis points year-over-year. As we move through Q2, we are seeing continued strengthening in our pipeline, order flow and backlog, providing us with improved visibility into the second half of the year. As utilization and recurring revenues continue to scale, we expect gross margin improvements in Q2 with more meaningful setup during the second half of the year, driven by higher utilization, recurring revenues and improved operating leverage. Turning to operating expenses.

First quarter non-GAAP operating expenses were $25.5 million, down 7% year-over-year despite an unfavorable FX impact of approximately $2 million related to shekel strengthening. Our OpEx performance reflects continued discipline around cost management while maintaining investment in our key growth initiatives, innovation road map and go-to-market activities. Non-GAAP operating expenses exclude approximately $2 million in legal costs related to a prior class action lawsuit. We recently reached an agreement in principle to resolve the matter pending final documentation and court approval. The settlement is largely covered by insurance, and we are pleased to put this matter behind us.

Adjusted EBITDA loss for the first quarter was $2.8 million compared to an adjusted EBITDA loss of $3.9 million in the same period last year. Adjusted EBITDA margin for the quarter was negative 5.8%, representing an improvement of approximately 260 basis points year-over-year and better than the midpoint of our guidance range. Turning to cash and balance sheet. Our cash balance, including bank deposits, marketable securities at quarter end was approximately $462.2 million. Operating cash flow for the first quarter was $6.3 million, representing our 10th consecutive quarter of positive operating cash flow and reflecting our continued focus on working capital efficiency and disciplined financial management.

During the first quarter, we repurchased just over $30 million under our share repurchase program. Since the launch of our initial repurchase program in 2023 and through the end of the first quarter of 2026, we have repurchased approximately 9.1 million shares for a total gross amount of approximately $200 million. Our balance sheet remains very strong and provides us with significant flexibility to support organic growth initiatives, including AIC deployments, new product innovation and strategic investments that support our long-term strategy. Print Factory is a strong example of that strategy.

Announced after the quarter end, the acquisition strengthened our software workflow and production automation capabilities by supporting our long-term vision to build connected digital infrastructure for the textile and apparel industry. We expect the transaction to close during the second quarter. Turning to guidance. For the second quarter of 2026, we expect revenue between $51 million and $55 million with adjusted EBITDA margin between negative 5% and breakeven. Our guidance reflects the continued momentum we're seeing across customer activity, backlog growth and execution across the business. As expected, second quarter profitability includes continued investments in strategic initiatives, including Connections 2026 as well as some ongoing FX pressure from shekel strengthening.

Looking ahead, we continue to improve visibility into the second half of the year, supported by strengthening backlog, growing recurring revenues and continued momentum across the business. We expect continued revenue growth, improving profitability and ongoing positive operating cash flow generation as we continue scaling the business through 2026. With that, I will now turn the call back to Ronen to open the line for Q&A. Ronen?

Ronen Samuel: Thank you, Assaf. And operator, we are ready for the Q&A session.

Operator: [Operator Instructions] . The first question comes from the line of Brian Drab with William Blair.

Brian Drab: First, I just wanted to -- I think Assaf mentioned it, so the second quarter is off to a good start, and it's obviously evident in the guidance as well. But Ronen, can you just talk a little bit more about what you're seeing here early in the second quarter momentum coming out of connections and just talk a little bit more about what the setup is for the quarter and the rest of the year.

Ronen Samuel: Yes. Thanks, Brian, for the question. I'll give some kind of an overview and where we stand today and how do we see Q2. I'll start with the market. The industry is -- we see it is moving to on-demand production. We felt it that connection, and I will talk a bit more about connection later on but it was a strong sentiment, both from brands, retailers and of course, fulfillers looking to on-demand just-in-time production to meet the demand of the consumer. So this is a clear sentiment in the overall market.

We -- in the last 2 years, we worked very hard to shift our strategy to go after the mainstream of the market, the high production in the screen market and getting into new segments like the footwear. And Q1 results represent the success of this strategy. Overall, in Q1, you saw that we grew our revenue both in products and services and services include upgrades. Some of the upgrades for the Atlas MAX and -- but we are looking forward into Q2 that we're already getting a very, very strong pipeline for updates for the metrics. Impression, which is a leading indicator, grew by 12% on trailing 12 months.

We continue to see the impression growing across the board, both from customer and customized design installed base, but also new customers that just joined us and adding more capacity and specifically in the screen replacement from analog to digital conversion. We see the growth from customers, really interesting to see that when we look at the system mix, 40% of the systems that we delivered in Q1, some of them on the all-inclusive clip, some of them on CapEx came from net new. And 65% of the deals came from the screen market, the market that we are targeting, which we see a massive potential there.

And overall, when we look at the new business model of the AIC, it is really growing very nicely, both the AIC revenues and the ARR, both of them at around 100% growth year-over-year, and we expect it to continue to grow significantly in Q2 and the rest of the year. In parallel, we're working very hard to maintain our OpEx while the [ shekel ] is strengthening and it's a headwind for us. But actually, we managed to reduce OpEx year-over-year by 7% despite, as I mentioned, the shekel. On top of that, of course, we continue to generate cash.

This is for the 10th consecutive quarter, and we believe that we'll continue to generate cash for the full year. And what we've done this quarter, and we worked very hard in Q1 to deliver connection event in the beginning of Q2 that generate a lot of momentum. And I will talk about this momentum in a minute. Not forgetting that we work to announce the acquisition of Print Factory, which is a very strategic acquisition, which we are planning to close it during Q2. But I'm most proud of -- it's not about the number. It's really about being able to bring the innovation that the market was looking for. Metrics is a game changer for the industry.

The feedback we got from customers in connection was really unbelievable, above our expectation. The technology of Carbon Shield really is unique. Nobody has it on the digital side. And now customers can have one system that can really print on agnostically on any type of fabric from cotton to polyester to blended. And this provides a lot of potential. If we try to quantify this market, we mentioned in the past that we see our SAM is the $6 billion. Those are run lengths below 1,000. About 30% of those run lengths are made today on polyester, specifically for the sports and athleisure and some blended, which was very difficult to approach them before with digital.

And now we can definitely go after them and the feedback from customers, as I mentioned, very excited. We're already getting very strong pipeline for upgrades of the installed base of ATLAS MAX Plus and ATLAS MAX Poly to the metrics and customer also adding additional systems. We also demonstrated the Apollo. We took the Apollo another step forward with being able to print on cut pieces, opening up markets in Portugal, in Latin America, in some Eastern countries, but printing on cut pieces to really to automate printing on cut pieces is very complex, and we've demonstrated it and we're already having a good pipeline and even an order specifically in India for this application.

Presto Max that we presented first Presto Max Plus, it's a product that we worked for a long time to be able to penetrate totally new markets that digital was never there before. We are the only one that can go after technical, camouflage, footwear, performance wear, home decor. Those are totally new markets, new sums that we are going after. The feedback on the durability on the Durst and the vision systems really are impressive. And as I mentioned, we had a good Q1 for the Presto Max, and we believe that moving forward, we will see a growing pipeline and order for the Presto Max specifically in those marketplace.

Overall, if you're asking looking forward, what we see, we are seeing growing backlog into Q2 and H2, providing us with confidence for the full year to continue to bring growth and possible growth. Bottom line, we see stronger product portfolio, expansion into new markets and application, growing recurring revenue and a very clear position of Kornit as the technology and the platform leader.

Brian Drab: That was a very extensive answer. I appreciate it. And I kind of feel like I should just pass it on. But just quickly, I'll tack on one more question related to the Matrix and the Presto Max Plus. What -- can you talk at all about like just the amount of revenue that you expect to come from either upgrades or new system sales from those machines in the next -- in 2026, 2027?

Ronen Samuel: Yes. So I can give you some kind of directional not numbers, but where do we see the growth on this platform. So specifically on the metrics, first of all, for many of our customers that are choosing today ATLAS MAX and they were trying to be able to print on polyester on blended, they face issues. Those are incremental impressions that each customer now will be able to print on digital, leveraging Kornit and leveraging MAX metrics.

So from one hand, we will see a stream of revenue coming from upgrades of the installed base, and we have hundreds of systems, Atlas systems, ATLAS SMA system in the field, which we expect many of them, large quantities out of them to upgrade to the metrics. The second phenomenon that we are going to see is really impression growth on each one of them opening the market. Also because these systems, while you're using on printing on polyester using another chemicals, we will see revenue per impression going up on printing on polyester.

And of course, what we see today is that customers that were sitting on the fence saw the metrics, understand that the flexibility is much, much broader right now. The system much more agnostic jumping in. We already have nice backlog of new customers and existing customers that adding more systems already in Q2, but also into H2. So we feel very, very strong about the feedback and the results on demonstrating the metrics. Next week, we are going to actually to announce the release of the metrics at FestPA Barcelona. We are going to demonstrate it.

We have many, many meetings with customers, mainly from the European countries, but we know customers also flying from around the world to see the metrics, and we expect orders both for upgrades and new systems there. And as for the Presto Max Plus, the Presto Max Plus, as I mentioned, opening for us totally new markets. We demonstrated about 2 weeks ago, a tech process in Frankfurt, which is very much focused on the technical market. And we saw how unique we are in this market, going after really the footwear.

We see growth in the footwear, both in installed base but adding more system and growing the impression, but also from new customers that are joining with our technology and a very strong pipeline moving forward. We found out that our technology really has a great fit to go after other applications like Camouflage for military. We have a lot of interest there, and this is a massive market. We believe that we have a very strong value proposition, and you will hear a bit more about that later on. And there are other technical and functional applications that we are going after.

So on top of the value of digital being able to print on almost any fabric without pretreatment, without posttreatment, now we have the layer of durability that's really entering us not only into the fashion market, but much more into the technical and performance, which will generate for us additional revenue, both from the installed base that will upgrade to the Plus, but also newcomers in those segments that will buy the system and will print impression on top of the system.

Operator: Next question comes from the line of Greg Palm with Craig-Hallum Capital Group.

Greg Palm: As you guys know, I was at Connections myself. So I sensed, I think, everybody's excitement at the event. I'm just curious in terms of the actual event, what did you see from like an order booking standpoint? Can you give us just a little bit of kind of actual feedback that you got from customers that were there as well?

Ronen Samuel: Yes. Thanks, Greg, and thanks for being in the event as well. The event -- the aim of the event, strategically, we are trying to build the center of this movement of this industry, textile, apparel industry into on-demand manufacturing. We cannot do it ourselves. We have to have the entire ecosystem. And this event was about the ecosystem, and you've seen it. There were close to 600 participants in this event flying over to Miami.

Many of them, more than 300 customers and prospective customers, a lot of many brands, retailers, solution providers and partners that join us for this event with one aim in their mind is how we can accelerate the move to on-demand manufacturing, not only for customized design, but really for the long run for the brands and retailers. And there were speakers that was there on the on the stage. Most of the speaker was not from Kornit actually, it was from the industry talking about really about the move, the needs to move to the on-demand manufacturing and how important is. On top of that, of course, we have a solution showcase with many of other solution providers.

We introduced, of course, for the first time, the metrics, as I mentioned before, many applications. We had the Apollo there as well. And you saw the excitement. People were really standing around the machines, checking it. We had tens of live demos that people bought their file, bought their media, tested the machine, and we got order on sport. Some orders that were surprising from all kinds of countries. And we are coming out of this event with 2 things. One is really being able to position these connections event as an industry event as a movement for the industry where Kornit is in the center of it. The second, of course, is an outcome of numbers.

We have a very strong pipeline coming out of this event, some orders already in for Q2. We expect a large number of the pipeline to convert into H2 and already to the new year. The nice thing, the pipeline, a lot of it is from net new customers, some of them like it was the second or third meeting with Kornit that came to the event and this accelerated decision to move to digital.

Greg Palm: Okay. Perfect. And then just a follow-up on the matrix. In terms of actual like revenue recognition, I mean, do we expect later this year to see a meaningful uptick in revenue? Is it more of a '27 event? And just to be clear, is the bigger opportunity, whether it's initial or long term, upgrading the existing installed base? Or do you think there's a bigger opportunity for new system sales? I mean I'm sure it's a combination of both.

Ronen Samuel: Yes. So we already started taking orders at Connection. Once we show the system, we already took orders at Connection. As I mentioned, the product will be released next week. We have a few beta sites with extremely good feedback, both in the U.S. and in Europe. All of them will convert to revenue in Q2. Q2, we are going to have already revenues both in new shipment of metrics to the market and some upgrades. So we're starting to upgrade the installed base already in Q2. We believe that most of the upgrades for metrics will come into Q3 and a bit beginning of Q4 and of course, into the next year.

But it's definitely open for us the pipeline. And it's a question of when are we going to deliver and see the revenue start in Q2 this quarter.

Operator: Next question comes from the line of Eric Woodring with Morgan Stanley.

Maya Neuman: This is Maya on for Eric. I kind of just want to touch on the AIC model for a second. What percentage of new customers would you say are entering through AIC versus kind of the traditional CapEx method? And where do you kind of ultimately see that mix stabilizing? And are you also seeing like existing customers maybe shift their preference to AIC? Just any way to understand that mix.

Ronen Samuel: Yes, it's a very good question, Maya. Thank you. Look, it's different from different type of markets that we are serving, okay? In the screen market, most of the new customers that we are going after the screen market we see very high adoption of the AIC model. So most of them will be the AIC. And as you can -- as we mentioned many times, this is a major focus area for us of growth and it's already a major growth area for us. Most of them will be on AIC. And when I say most, it's more than 90% of them will be on the AIC.

In the customized design, we need to differentiate between existing customers to new customers. Existing customers, they have much more knowledgeable confidence and they know the cost structure of the CapEx. Some of them prefer to stay on CapEx while comparing to the price of the AIC. So there, we see a mix. with newcomer into customized design, we see also the tendency into more at the AIC. As the company growing and maturing with the move to AIC, we are pushing more and more into the AIC model, which provides us better predictability of recurring revenue, better gross margin longer term.

And the gross margin, when you think about it, is mainly coming because customers on AIC on average printing more impression the customer on CapEx. It's not really that the price there is much higher. It's very competitive to the CapEx, but what we see is that customers on AIC printing more because they have a commitment to print more and they have incentive to move above the commitment. So if you look ahead, you will see more and more revenue or more and more deals moving into the AIC versus the CapEx. I must say that Q1 was relatively strong in terms of CapEx deals.

Maya Neuman: Got it. And then just one more for me. You had a pretty healthy quarter of buybacks this quarter. Is that the right quarterly run rate to think about for the rest of the year? Or just any kind of outlook you can help with there?

Assaf Zipori: Maya, this is Assaf. I would say that we are continuously evaluating our capital allocation through the strategic priorities that the company has. We have the plan to buy up to $100 million. It doesn't necessarily mean that we have a consistent run rate. It changes based on our priorities. We have the organic growth that we're supporting AIC. We have the nonorganic M&A stuff, like Ronen mentioned, we just acquired a very strategic company in the software space, and then we have the buyback. Our commitment is to provide the ideal value to our shareholders through kind of leveraging the 3 components.

Operator: Next question comes from the line of Jim Ricchiuti with Needham & Co.

James Ricchiuti: So you're clearly making progress with system sales to new customers. I'm curious, what is -- what's the average selling cycle like now in terms of time lines for bringing on some of these newer customers?

Ronen Samuel: Thanks, Jim. Look, there's a few things that are happening. First of all, the market is maturing. If in the past, we needed to convince customers to move to digital. Today, we see more customers as the edge to move to digital, which by itself shorten the sales cycle. AIC model, by definition, makes the sales cycle shorter. And we see some deals being closed in a matter of 1 or 2 months really from the demonstration of the systems. So it's really shortening. On the CapEx side, it really depends if it's existing customers or new customers for existing customers in many deals, they are coming to us and asking for additional system or upgrades.

So sales cycle is quite short. With new customers, it really depends again which market segment we screen is a bit longer with customized design is shorter. Overall, the bottom line answer is that our sales cycle is becoming shorter versus what we used to have.

James Ricchiuti: And Ronen, as you think about the newer customers, what is your line of sight? Or how would you characterize the opportunity to drive multiple machines at these customer locations?

Ronen Samuel: This is the really nice thing that we see right now. I mentioned in my prepared remarks, I gave 2 examples of customers that just joined Kornit a year ago and taking one Apollo and a few Atlas MAX and in Q1, really take it to the next level. So within a year, they really grew very fast. I gave the example of Pos, printers, but we have a few others. Look, with the screen market, which is the main focus for us as the biggest market we are going after, the initial sales is the most complex one because they are not used to digital, they are not used to their workflow. The factor.

Now that they see the competitors are using digital, some of them has no choice, they are moving to digital, but they are moving with caution. So they're taking 1 system or 2 systems in the beginning with a hope if it's successful to really move big time. And this is exactly what we see. We see many of them are starting with 1 or 2 systems within 6 months, adding additional capacity, moving to the Apollo or taking additional Atlas MAXs.

James Ricchiuti: Got it. And just quickly, I was curious at the activity with your large global strategic customer. I may have missed any reference to it in the call so far.

Ronen Samuel: Yes. So as you know, we have confidentiality agreement with them, and we cannot talk too much about their business. As I mentioned, in end of Q4, we got an order for them for upgrading -- continue upgrading their fleet into the MAX platform, which we are executing. And of course, they are very involved in looking at our technologies, both on the Plus, the metrics, the Apollo. We have a very close relationship, very good discussion with them, and we are very happy to support them with their growth moving forward.

Operator: The last question comes from the line of Kieran McCabe with Cantor Fitzgerald.

Kieran McCabe: This is Kieran on for Troy Jensen. I think part of my question was already answered when you answered Jim's question about the sales cycle. But maybe especially with the Creso Max, maybe if you can kind of give a little color on the new markets, kind of either the size of the opportunity of some of those new markets and maybe growth potential or adoption in those maybe newer markets like home decor. I think also you mentioned strong interest in Camouflage. So maybe a little more color maybe on the opportunity and sort of rank ordering the potential of some of those newer markets.

Ronen Samuel: Yes. So we are still in an initial stage, yes, first of all, to understand really the sum that we are going after. Those markets are massive, the camouflage market, military, you can imagine that there are billions of billions of impressions that we can go after. We are trying to understand exactly where can we play and what is our sum. Specifically on the footwear, we were talking about 2 billion impressions that this is our sum. And we are going after it, and we see a really nice scale up within our customer base, within new customers are joining and really strong pipeline.

We believe that we have a very differentiated value proposition, and we are starting to get a lot of interest not only from fulfiller, but with -- from the biggest, biggest brands out there that you're all familiar with. So it's really a good sign, and we believe that this is -- will be a growth engine, one of the growth engines for Kornit. In the camouflage, of course, this is a big market. The first time that we really saw the interest is now that we introduced the Duatech on the Presto Max Plus. Before that, we didn't have it. Techfores was perfect to show it.

And I can tell you that we had tens of meetings there with all kinds of militaries personnel that show a lot of interest with our capabilities and unique solutions that we are bringing there. On top of that, home decor, home decor is a massive market. You will see some more development in the home decor coming later this year from Kornit. And we believe that this is a big opportunity. Another market is the performance. We were spoking about compression. We have a specific project on compression with one of the biggest brands. And once I will be able to speak about it a bit more, I will share a bit more information in a later stage.

Operator: Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Mr. Samuel for closing comments.

Ronen Samuel: First of all, thank you all for joining the call. Before we close the call, I wanted to sincerely thank the entire Kornit team. Also to thank our customers and our partners for the passion, for the commitment, for the support behind the strong progress we are making together. Q1 was an important quarter for Kornit. The industry continued to accelerate toward the digital on-demand production and Kornit is increasingly becoming a key platform enabling that transformation. We are seeing growing customer momentum, strong engagement across markets and a very positive feedback on the newest innovation and solution.

We are entering the rest of 2026 with a strong momentum, improving visibility and growing confidence in our strategy, execution and long-term opportunity. Thanks again for joining today's call. Andy?

Andrew Backman: Great. Thanks, Ronen, and thanks, Assaf, and thank you all for joining us today and for your continued interest in Kornit. As always, please feel free to reach out to me directly should you have any follow-up questions. Renju, could you please close the call?

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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