Kornit Digital Ltd (KRNT) 2018 Q2 法說會逐字稿

Good day, everyone, and welcome to Kornit Digital's Second Quarter 2018 Earnings Conference Call. As a reminder, today's conference call is being recorded. After prepared remarks, we will provide instructions to conduct the question and answer.

At this time, I'd like to turn the conference over to Tom Cook. Please go ahead, sir.

Thank you, James. Good afternoon, everyone, and welcome to Kornit Digital's Second Quarter 2018 Earnings Conference Call.

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 objectives, plans, strategies, statements of preliminary or projected results of operations or our financial condition and all statements that address activities, events or developments that the company intends, expects, projects, believes or anticipates will or may occur in the future. Forward-looking statements are subject to known and unknown risks and uncertainties and are based potentially on inaccurate assumptions that could cause results to differ materially from those expected or implied by the forward-looking statements. The company's actual results could differ materially from those anticipated for many reasons, and 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 March 20, 2018, which identifies specific risk factors that may cause actual results or events to differ materially. Any forward-looking statements are made as of this call hereof, and the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, 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 press release published today, which is posted on the company's Investor Relations site. On the call today, we have Ronen Samuel, Kornit's Chief Executive Officer; and Guy Avidan, Kornit's Chief Financial Officer.

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

Thank you, Tom. Good evening, and thank you for joining our second quarter of 2018 earning conference call. I would like to begin today with a brief overview of our second quarter followed by key observation of my first 2 months at Kornit.

I'm pleased to report a very strong second quarter, which is above the high end of our guidance for both sales and operating income. Our top line was up 25.5% year-over-year as a result of the strong demand for our products in the marketplace and the acceleration of the shift to digital in textile.

Another highlight of the quarter was our gross margin, which expanded 260 basis point in the quarter. The gross margin story for Kornit is ongoing, and we expect that longer-term driver will continue to improve our margin profile over time. The recent improvement is related to a favorable mix of high volume of industrial system and increase in ink sales. We also reported a notable uptick in operating leverage. The improved profitability is an outcome of higher revenue, gross margin expansion and a lower OpEx as a percentage of sales. For the balance of 2018, we expect OpEx to remain within the range that we have previously disclosed of $15 million per quarter, plus or minus $0.5 million.

As we look to the balance of the year, we are very well positioned to continue our growth trajectory with a strong second half. This includes growth across geographies and customers, along with continued execution on the large customer project that were delayed at the end of 2017. Based on conversation we had with customer, we expect strong system demand to continue in the second half and produce a fairly even split of sales between the final 2 quarter as opposed to our typical seasonal uptick at year-end.

Next, I'd like to provide an update on a few initial impressions since joining Kornit. Over the last few weeks, I had an opportunity to meet with many of our stakeholders to gain better understanding of the opportunities and challenges in front of us. As part of the handover from Gabi, we traveled together around the world to meet with our key customers, channel partners and our employees, while also conducting deep business reviews with our global management team. I was amazed by the extent of opportunities in front of us and believe we are at a very positive inflection point in the evolution of our company. Having spent most of my professional career in the digital printing space and having observed similar life cycle of digital printing technology, I believe we have an opportunity to rapidly accelerate our progress over the next few years.

While it is a little early to offer strategic details about how to maximize our growth, there are several fundamentals that support this view. This includes the market environment, our existing and future technology, our global team and infrastructure and our ability to service and support our customer and help them grow their business. I will touch on each of these aspects individually, beginning with the market environment.

Currently, we are enjoying very strong momentum as changes in consumer behavior are creating new customer priorities in favor of digital printing. I had the opportunity to meet with many of our key accounts, and it was clear from this conversation that the supply chain is recognizing a need for shorter cycle time to market and ability to produce short run at close proximity with quick turnaround times to end customer and new and innovative ways to grow their online business.

All of these trends play right into the core of Kornit's value proposition. It was also notable that these trends were broad-based, with smaller account delivering similar feedback and requirement as our larger, core strategic accounts. This suggests to me that we have a vast customer base to pull from, and we are well positioned to capture the broader adoption of digital technology.

The evolution of our technology is also enabling growth in customer interest. Our latest generation system featuring HD and higher throughput have now reached a critical point with large multiple national customer, online retailers, brand owners and contract vendors. One of the most important factor towards broader adoption rate is our ability to capture longer job running with favorable economics to those offered by screen printing. With our latest-generation system now producing 200 units run at a cost which is lower than screen printing even with only 2 colors and 450 to 500 units run for 6- to 8-color job, we are effectively expanding our addressable market quite rapidly. To oversimplify this converging trend, our cost effective and highly productive solution are increasing our addressable market just as the market is reducing its quantity per run into the range of our system capability.

As an example, Delta Apparel, one of the leading apparel companies in the U.S., and through its wholly owned subsidiary, DTG2Go, one of the pioneer of digital DTG printing, continues to expand around the U.S., securing 2-day delivery to its customer throughout most of the U.S. Proximity manufacturing in multiple location is at the heart of their strategy. And we had been partnering in this journey with Delta for many years. I'm pleased to report that this partnership continues to grow and additional Kornit systems will be added to support the growth strategy in both existing and new facilities across the U.S.

Turning to service and support. I was happy with the feedback I received and the progress we made for our comprehensive service platform, which is supported by a robust global infrastructure. As I've seen constantly during my career, this can be a strong differentiator to attract large-scale global customer and create a substantial competitive edge. Our ability to provide maintenance, troubleshoot and quick fix and address customer issues is critical to grow with large strategic accounts. As we continue to introduce highly sophisticated industrial solution, 24/7 production and increased uptime become essential to meet customer expectation. As such, the continued growth of service capability will be an important key to our success.

And finally, I had the pleasure to meet with our senior team and hundreds of our employees and was very encouraged by the immense talent and passion they bring. There is a collective energy and excitement across our operating and sale location with a shared mission to expand the use of digital technology in textiles. This passion is rooted by corporate culture to enable our customer success and also by our underlying corporate mission of sustainability in textile printing that our system help to facilitate. Furthermore, this summer has been especially active with large customer visits to our headquarter. And feedback across the board has been that our development team and technology and infrastructure are at the leading edge, providing customer with comfort they need to order in order to invest in our solution.

Before turning the call over to Guy, I would like to share a brief summary of our trade show activities during the last quarter, which in total included more than 10 shows. FESPA in Berlin was our major event of the quarter, where we showcased our HD technology that generated tremendous buzz around the market. In addition, together with a partner, we showcased the Allegro at Texprocess, where we demonstrated our modern micro-factory can address the need for mass customization in an efficient, cost effective and socially mindful way.

In the second half of 2018, we will be attending SGIA in Vegas, which has traditionally been one of our largest event of the year. In addition, in October, we will be hosting a grand opening at our New Jersey showroom with analyst and investor, which will give us an opportunity to share details of our strategic plan and introduce investor and analyst to the senior leadership of Kornit. We will be sending out detail and save the dates to this event in the next couple of weeks, and we look forward to seeing you there.

Now I would like to turn the call over to Guy for a closer look at the numbers and our guidance.

Thanks, Ronen, and good evening, everyone. Before beginning the financial overview, I would like to remind you that the following discussion will include GAAP financial measures as well as non-GAAP pro forma results.

Our second quarter non-GAAP pro forma results reflect adjustments for the following items: stock-based compensation expenses which totaled $1.2 million; amortization expenses related to the acquisition of intangible assets in previous years in the amount of $266,000; taxes on income related to non-GAAP adjustment in the amount of minus $93,000; and $118,000 for restructuring expenses in the U.S. A full reconciliation of our results on a GAAP and non-GAAP basis is available in the earnings press release issued earlier today and on the Investors section of our website.

Second quarter non-GAAP revenue, net of the $1.5 million warrants impact, increased by 25.5% to $35.9 million versus $28.6 million in the prior year and increased 15.3% versus the prior quarter. Revenues grew to record level this quarter thanks to successful launch of the Avalanche HD in the U.S. and Europe as well as fruitful continuation of system deployment with one of our major global customers.

Services revenues for the second quarter were $3.8 million, accounting for 10.5% of total revenue, an increase of 34.5% from the prior year and a decrease of 13.3% from the prior quarter. The amount attributed to the noncash impact of warrants in the second quarter was $1.5 million or 4% of revenues versus $42,000 in the previous quarter and $1.4 million or 4.7% of revenues in the second quarter of 2017. You can see the warrants impact this quarter versus the prior quarter and the previous year on revenues and margins in Slide #14.

By geography, 50% of our sales were from the Americas; 39% from Europe, the Middle East and Africa; and 11% from the Asia Pacific region.

Moving to customer concentration. Our main U.S. distributor contributed 9.9% to our overall revenue compared to 14.1% in the prior year period. And a major customer contributed 23.9% of our overall revenue of global business this quarter compared to 23.1% in the previous year. Our top 10 customers accounted for 55.2% of our overall revenue compared to 63.6% in the prior year.

Moving to profitability. Non-GAAP gross margin in the quarter increased to 49.2% from 46.6% in the prior year period and 50% in the previous quarter. Higher margin this quarter versus the year-ago quarter were the result of a more favorable revenue mix as well as improved margin from services. On GAAP basis, gross margin were 48.6% versus 46% in the prior year period and 49.5% in the previous quarter. Warrants impact on non-GAAP gross margin were 203 basis point this quarter versus 251 basis point in the prior year period and 7 basis point in the previous quarter.

Moving to our OpEx items. I'll discuss these items on a non-GAAP basis, which exclude nonoperating charges previously mentioned and highlighted in our GAAP to non-GAAP reconciliation included in today's press release.

Adjusted research and development was 14.2% of sales or $5.1 million compared to 15.3% of sales or $4.4 million in the prior year. The increase in R&D expenses primarily reflect an increase in material for development.

Sales and marketing expenses in the quarter were $5.9 million or 16.3% of sales compared to $4.8 million or 16.8% in the prior year. Higher sales and marketing expenses versus the prior year were the result of the expanded sales and marketing group in the United States.

General and administrative expenses in the first quarter (sic) [second quarter] were $3.5 million or 9.8% of sales compared to $2.8 million or 9.9% in 2017. Higher G&A in the quarter resulted predominantly from headcount additions and expenses related to the CEO transition. Headcount as of June 30 was 412 employees, 2 employees more than the previous quarter.

During the last few quarters, we have moderated our personnel growth. And as we have mentioned on previous calls, we expect the pace of OpEx growth to be less than the pace of revenue growth in 2018. We expect this to provide some operating leverage compared to the prior year. However, we are planning to continue building our customer-facing infrastructure in order to take advantage of the expanded market opportunity we see evolving.

Non-GAAP operating income for the second quarter was $3.2 million, an increase of $1.9 million versus the year-ago quarter. Warrants impact on non-GAAP operating margin were 364 basis point this quarter versus 449 basis point in the prior year and 13 basis point in the previous quarter.

Non-GAAP net income for the second quarter was $3.2 million or $0.09 per diluted share, an increase of $1.7 million versus the year-ago quarter. GAAP net income was $1.8 million or $0.05 per share on a diluted basis compared with net $215,000 or $0.01 per share for the year-ago quarter. Warrants impact on non-GAAP net margin were 363 basis point this quarter versus 447 basis point in the prior year and 13 basis point in the previous quarter.

Our financial income this quarter was $295,000, predominantly as a result of accrued interest of our cash investments. Cash balances, including long-term marketable securities at quarter-end, were $102.7 million compared to $89.3 million as of June 30, 2017. Net cash provided from operating activities was $4.9 million this quarter compared to $1.8 million net cash provided in the prior quarter and cash used in operating activities of $5.7 million in the year-ago quarter. Cash provided from operation was mainly a result of profit, net of depreciation and amortization, decrease in inventory, offset by increase in trade receivable. As mentioned in previous call, we're planning to build a new ink plant and complete our new demo center and offices in New Jersey. For these purposes, we expect to use $4 million in investment activities through year-end.

Turning to our guidance for the third quarter of 2018. We expect revenues to be in the range of $36 million to $39 million and non-GAAP operating income to be in the range of 10% of revenue to 14% of revenue. This number assumes no impact of the fair value of issued warrants in the third quarter of 2018. As a reminder, the calculation of warrants fair value is based on the combined effect of estimation of future revenues from Amazon, future Kornit share price in unknown date, future stock volatility as well as other variable that currently are not predictable and some of which have no correlation to our business. Since as of today, we're not able to predict these variables, we assume the warrants impact at 0 value for guidance purposes only.

I'll now transfer the call to Ronen.

Thank you, Guy. And with that, operator, we'd be happy to take any questions.

(Operator Instructions) And our first question today will come from Joseph Wolf with Barclays.

Welcome, Ronen. I guess I had a question on the geographic mix, where it looks like Europe is picking up specifically even as a percentage of sales and as revenues. Can you talk about customer numbers? And is your largest customer -- is Amazon taking product in Europe right now?

Yes. Thank you, Joseph, for the question. As you know, we cannot disclose customer names and talk about specifically of any customer. But yes, we see overall growth across the regions. Europe, specifically, had a very, very strong Q2. And we forecast also Q3 to be strong for Europe.

Okay. And then I guess you mentioned this briefly, but last quarter towards the end of the quarter, there were new product launches. And you gave a specific number on the impact of those products into the revenue stream. Even if you're not willing or think it's -- you don't want to do that on a quarterly basis, can we just get a sense on the pull-through and how much of the growth is coming from either the actual sales of the new product or the expectation or the capabilities of the new product right now, product set, not specific by product.

Yes. So I cannot get to the numbers for how many units we sold from each model. The only thing that I can refer into is, we see a really strong demand for the HD. We're getting fantastic feedback from our customers. And the product mix is trending more and more into the Avalanche HD.

Okay. And then just finally, I think, Guy, you mentioned operating leverage. But if we take the commentary about the fourth quarter being sort of in line with the third quarter, is there still room for operating leverage on similar revenues?

Yes. And you can take this quarter and compare it to the second quarter in 2017 and you can see some leverage. We mentioned it's going to be some leverage. And at the same time, we still plan to increase our investment, especially when it comes to go to market, customer-facing, et cetera. But you will see leverage.

Next we'll hear from Jim Suva with Citi.

This is Tim Yang calling on behalf of Jim Suva. Just a quick follow-up on the largest customer. I know that you probably won't talk in detail, but can you maybe just share with us about your progress in terms of the second manufacturing site. Is it on track or is it ahead of schedule or is it a little bit behind schedule as you expected it compared to last quarter?

Yes. So again, thanks for the question. Again, I cannot relate unfortunately for any specific customer and their internal plan. The only thing I can say, that the relationship with all the strategic customers are extremely good, and we see growth across our strategic customer worldwide.

Got you. And then a follow-up question on service revenue. I think it grew 35% year-over-year last quarter, but declined sequentially. So I think that you mentioned there was a system upgrade revenue during Q1. How should we think about service revenue for the full year and its profitability?

So we mentioned before that we have a few buckets for the service revenue. One of them is upgrade. And the upgrade is lumpy. Year-over-year, we're still seeing very good growth top line and margin for services. We still expect 2018 that revenues from services will grow, and we will see more revenues from upgrades this year.

Do you see that service revenue to be breakeven for the full year 2018?

So we said that before that because of the lumpiness, we will have some quarters that are profitable and some not. And we expect to be profitable for the whole year only next year.

Next we'll hear from Jim Ricchiuti with Needham & Company.

I just want to go back to the European business. I know you can't talk about specific customers, but can you give us a sense as to the makeup of that revenues? Were they concentrated among a few customers or were they fairly diversified among the customer base?

So we see growth across our strategic account and small medium-sized account. Actually, it's very similar growth. And what's unique, I would say, with this quarter is that we see the mix of product changing from the Storm into the Avalanche HD which, of course, bring also higher revenues and gross margin.

Okay. That's helpful, Ronen. Can you comment on some of your other product line? Can you talk a little bit about where you are with roll-to-roll machine, the Allegro?

Yes. For us, the Allegro and the roll-to-roll market is very, very important. We see it as very strategic. We are continue to invest in this market with the current Allegro and future products that we are working on. At this stage, we are putting more effort in the go to market and expanding our sales coverage across the different region and expect to see the revenue coming from the Allegro family increasing in the coming quarters.

How would you characterize it in this quarter? And again, I'm not looking for specifics, but just relative to other quarters, how are the Allegro revenues?

On track, on track.

Last question for me is, I'm wondering if you can give any kind of an early read on the ink revenues for the new HD products. I guess what I'm asking is, are you seeing a higher utilization for the machines that have offset the overall improvement in ink consumption that you're providing customers?

What we are hearing from our customer, they see the benefit of the HD, both in terms of the quality and of course, the cost. What we see that our customers by buying, by purchasing the HD, enable to get into longer runs and taking job out of screen. By that, they're increasing the throughput or the capacity and the utilization of the machine and adding additional presses also in the short term and longer term.

We'll move on to Brian Drab with William Blair.

I think arguably the most important number to focus on here in your results is the revenue number. And it's convoluted by, unfortunately, by the Amazon warrant situation. On Slide 10 in your deck, you say quarterly non-GAAP revenues of $35.9 million were up from $28.6 million last year. I don't think that, that's right. Maybe I'm just the one that's wrong here. But last year, non-GAAP revenue was $30 million with $1.4 million of warrants, right? And I'm trying to discern whether $35.9 million is the GAAP number with $37.4 million in the third quarter of this year actually being the correct non-GAAP number.

Yes. We amended the numbers. We actually got the comments from the SEC later, meaning after the second quarter of 2017. So we amended it after that. So if you've gone back to the second quarter of '17, so you can take the $28.5 million. That's net of the $1.4 million impact. You connect the 2 numbers together to get $30 million. That's the number that you know. So it's sort of adjusting the number of the second quarter to the SEC requirement that came later. So if you actually look -- Brian, I'll say this in a different way. If you want to look at the businesses and if you want to compare the business Q2-over-Q2, right, without the impact, so you should use the $30 million for the second quarter of 2017 and take the GAAP number that we mentioned this quarter and add $1.5 million.

Meaning you add $1.5 million to $35.9 million?

Exactly.

Okay. Okay. That's what I thought. I just want to be really clear because I don't think it's perfectly clear on Slide 10 or at least maybe it's clearer on the -- it's just confusing to me. But I think that revenue...

Yes. You're totally right. Right, Brian, I mean, if it confused you, it probably confused everybody. So there's another slide. You can go drill down to Slide #14 because of all the -- just as we mentioned, we added one more slide. That's Slide #14. That will help you see the picture.

Yes. And I had not caught that slide. That's perfect. Okay. All right. Great. Well, I think it's still helpful to go through. And can I just ask you within the third quarter? You said third quarter and fourth quarter revenue would be about similar. Should we still expect in the fourth quarter consumables to account for a larger proportion of sales given the holiday season and that mix to be kind of similar to the past?

Yes. So Q4 usually is the peak for our supplies business. And what we've seen in the marketplace is that Q2 and Q3 are big accounts or strategic account investing in system, and they are less investing it in Q4.

Okay. And then one last question to kind of tie this all together. If the revenue adjusting for the warrants was about $37.5 million this quarter, the guidance midpoint is for $37.5 million in the third quarter. The fourth quarter is to be about similar to the third quarter, it's kind of $37.5 million for the balance of the year. I don't know if you'd like the second quarter, third quarter, fourth quarter without any sequential growth. But could you comment as to why that would be?

Your math is pretty much in line. I mean, if you're looking at the mid of the guidance, you're right.

Okay. So it's where you are now with guidance. Is there any specific lumpiness or order timing that would result in that or is it just potentially conservative guidance?

That's the guidance.

Next we'll hear from Patrick Ho with Stifel.

Maybe as my first question in terms of the HD customer mix. You talk about the strong interest and order flow and obviously the revenues you generated this past quarter. Can you give a little color whether they're coming more from new customers for HD or existing customers who are upgrading to the HD products?

So it's a mix. And I would say it's an even mix. We can see strategic accounts that are moving to the HD and upgrading their system to the HD. And we can see totally newcomers, small, medium and key accounts entering directly into the HD technology.

Great. That's helpful. And maybe as a follow-up question on the product front. I think you introduced the Storm HD, I think, late last quarter or early this quarter. Given that you talk about on the call that some small, medium-sized business went straight to the Avalanche HD, is the Storm HD still targeting the small, medium-sized businesses that you originally talked about last quarter?

Yes, yes. We still have vast amount of potential customer from the low end of the market and midsize of the market that cannot afford investing in the Avalanche and they will go for the Storm HD. And this is exactly the target of this machine.

Great. And final question for me, maybe for Guy. In terms of OpEx, you said you're going to maintain OpEx at around that $15 million level for the rest of the year. How do you balance, I guess, some of the comments you made about, I guess, building out your services infrastructure, ramping some of that up and maintaining those strict OpEx levels?

Yes. So we mentioned and Ronen said it before that the target is still $15 million, plus/minus $0.5 million. Currently, we're under $15 million. So we still have the margin not to cross the $15.5 million.

Next we'll hear from Greg Palm with Craig-Hallum Capital Group.

Ronen, welcome aboard, officially, I guess.

Thank you.

Just about a week ago, your large customer publicly announced the launch of its on-demand print service over in Europe. So I guess just wanted to confirm or should we assume that you've at least participated in the build-out over there? And given the launch date, should we assume the build-out is done for the time being or is there more to come here in Q3?

Yes. As I mentioned before, I cannot relate to specific customer news at this stage. Whatever is public is public, but I cannot relate to our relationship on that.

Okay. Can you give us some sort of sense in terms of quarterly revenue run rate for your large customer maybe or maybe your large customers, in general? Should we assume that Q2 should be kind of the high mark for the year or should we expect something kind of similar in Q3 and Q4? I think you said something like you expect systems sales to be spread out over Q3 and Q4 equally. But any more color you can give on how that compares to the rate here in Q2?

Yes. I can say that our strategic accounts overall, we can see a peak in Q2 and Q3, they are preparing themselves for the peak season. And Q4 will be more focused on the midsize customer rather than strategic accounts and of course, the ink.

Perfect. That's helpful. As it relates to some of the new products, I know you've alluded to in the past, can you give us any more details on sort of time line, kind of launch dates? I guess I'm really curious whether some of the new products are more focused on or intended on lowering the cost of print, something like the upgrade in the HD or maybe expanding the addressable market opportunity and the specific type of print applications that are out there.

I cannot give any specific dates right now for new product introduction. I can say that we are working on new product introduction both on the DTG market and the roll-to-roll market. And we are working on expanding the market coverage by entering new application and new capabilities.

(Operator Instructions) We'll now hear from Chris Moore with CJS Securities.

Yes, maybe just talk a little bit on potentially on the M&A side. Is that an area that kind of filling the pipeline, you're spending much time there? And kind of what types of opportunities might you be looking at down the line?

Yes. Thanks for the question. First of all, I will talk about the organic growth because I see huge potential of organic growth within Kornit if it's across different territories. Is it with our current product, the HD, the roll-to-roll, the Vulcan? Is it with new application that we are planning to go to the market? So organic growth is still our main focus. And I'm a new CEO coming to the company. I cannot now relate to inorganic direction. Personally, I strongly believe in inorganic growth as well. We are looking and exploring different direction of inorganic, but I cannot relate to it specifically, and I need a bit more time for that.

Got it. So on the organic side, can you maybe just talk a little bit further about the kind of the timing of the new facility in New Jersey, the new ink plant? And I think you said it was $4 million in CapEx. Just talk about that a little bit further.

Yes. So we are entering the new demo facility and offices in New Jersey mid of September. And we are going to open -- actually, end of August, we are entering there. And we are going to have the grand opening early October. And we are going to have the Analyst/Investor event in this site. It's going to be exciting. It's a big facility. We are going to demonstrate all our solutions. And it would be a great place to bring customers and investors. As for the ink plant, we are still in the planning mode. And the project is currently planned for 3 years. And we are planning to start the project on the ground in December 2018.

Just to add, Chris, cash flow-wise, we expect to pay for the rest of the leasehold improvement in New Jersey in the third quarter. And that's about 1/4 of the number we mentioned in the script. And investment in the ink plant, more towards the end of the fourth quarter.

That will conclude today's question-and-answer session. I'll now turn the conference over to Mr. Ronen Samuel for any additional or closing remarks.

Okay. I just would like to thank everyone on the call. Thank you for your question. I must say that I'm very excited to take Kornit to the next level. I see huge opportunity and thank you for your warm support. Hope to see you soon in New Jersey in our Investor Day. Thank you.

That does conclude today's conference call. Thank you for your participation, you may now disconnect.