Kornit Digital Ltd (KRNT) 2021 Q1 法說會逐字稿

Greetings. Welcome to the Kornit Digital Limited First Quarter 2021 Earnings Conference Call. (Operator Instructions)

Please note, this conference is being recorded. I will now turn the conference over to your host, Monica Gould, Investor Relations for Kornit Digital, you may begin.

Thank you, operator. Good morning, everyone, and welcome to Kornit Digital's First Quarter 2021 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 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 on March 25, 2021, which identifies specific risk factors that could 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 release published today, which is posted on the company's Investor Relations website.

I will now turn the call over to Ronen Samuel, Kornit's Chief Executive Officer; and Alon Rozner, Kornit's Chief Financial Officer. At this time, I would like to turn the call over to Ronen.

Thank you, Monica. And thank you all for joining us on our Earnings Call. I'm excited to share with you a strong start to the year and an outstanding first quarter results. We significantly exceeded our guidance on top line and profitability, and our outlook for the year is very strong. As the world moves into the post-pandemic era, the textile industry is in desperate need to accelerate its digital transformation and mass adoption of digital, sustainable, on-demand production. The business opportunity ahead of us is enormous and we are laser-focused on introducing continued innovation and scaling our business on all fronts.

Our first quarter results are another steps on our path to become a $500 million revenue run rate business ahead of plan. Total revenue increased by 152% year-over-year to $66.1 million, net of $3.1 million in warrants related to a global strategic account. We experienced another record quarter of shipments for our mass production systems spread headed by the Atlas and the Presto. Our recurring consumable business continue to scale, and we continue to outperform our profitability goals and services. During the second half of the last year, we discussed engagements on major global expansion projects with multiple strategic accounts, which we are now rolling out. In March, we announced that Printful will purchase more than 50 Atlas systems during 2021 as part of its global expansion plan and the rollout began this quarter.

As an early adopter of Kornit technology, Printful has grown from a small print operation in the emerging customers design segments to become a global leader in taking digital creative concepts and making them real. Their growth demonstrates the overwhelming potential of digital transformation by creating a mega marketplace that empowers digital natives to conceive and scale their brands. We are proud to help Printful reach the next stage of their journey.

We are witnessing parallel expansion growth across our key and strategic accounts. As an example, we expanded our partnership with a leading supplier of licensed and private label apparel, which produces uniquely designed clothing for some of the largest gaming licensors, TV studios and mega retailers in the world, and they are experiencing tremendous growth. This supplier added 8 new Atlas systems to its fleet this quarter, and expects continued growth in the coming years. As for our global strategic account, the execution remains very strong as we move into accelerated implementation phase of their ambitious global expansion plans. We delivered a record number of Presto systems in the first quarter, doubling shipments sequentially from the fourth quarter. Our recurring DTF consumable business has almost tripled from the fourth quarter, and we're very encouraged by this momentum as we continue to build Kornit's brand recognition in the heart of the fashion and home decor industries.

The Kornit Tel Aviv Fashion Week was a tremendous success, more than 40 designers showcased how diversity and individual expression can be enrich and celebrated hand-in-hand with a vision of a more sustainable world. While the event was focused primarily on building awareness, the business momentum this event created is remarkable, and we look forward to the global rollout of these initiatives in top fashion capitals globally.

Last week, we shared our exciting partnership with mega online brand and retailer, ASOS and its supplier Fashion-Enter U.K. as part of ASOS FASHION WITH INTEGRITY corporate goals. As part of this partnership, joint teams are implementing Kornit end-to-end workflow enabled microfactory to react quickly to seasonal shift in demand and establish more efficient, low impact, sustainable production process. We expect this partnership to expand into a mega online brand.

Scaling of our new software workflow business line is progressing very well, and we are engaged in strategic activity with brands, license source, mega online marketplaces, existing fulfillers and net new logos of all sizes looking to leverage our unique cloud-based software workflow platform to adopt a digital native supply chain for on-demand textile production at a global scale as well as automate the production flow.

In Q1, we significantly overachieved our internal targets for new and existing Kornit customer adopting our workflow solutions.

And our pipeline continues to grow as customers of all sizes embrace the strategic value of our offering. 2 weeks ago, we made our first strategic new product announcement of the year with the launch of our MAX technology, which establishes a new standard of on-demand fashion and apparel production. The MAX technology delivers unparalleled retail quality, combined with our evolutionary XDi 3D print capabilities for new high-density graphic decoration that can replace embroidery, vinyl and heat transfer analog process in a single waste free digital process.

We also introduced our new patent pending robotic automation technology to significantly ease the burden of manual labor and increase the productivity. The MAX technology dramatically expands the reach of digital on-demand textile production due to the center of mainstream fashion and apparel and significantly expands our addressable market into lucrative segments like professional team sports, high-end athleisure and diverse categories of fashion wear.

The first product from the MAX line is the carbon-neutral ATLAS MAX, which is commercially available with deliveries starting in June and initial revenue contribution anticipated in the second half of the year. The ATLAS MAX is delivered with the new XDi 3D technology built in. And upgrade to the Kornit Atlas systems will be available during the first quarter of 2022. This is just the beginning of revolutionary future new products coming from the MAX line, which will unlock additional massive and exciting market segments for Kornit.

In summary, we had an exceptional start to the year and our backlog continues to grow. In our last quarterly earning call, we discussed that we expect to see significant sequential growth from the first quarter of the year through each of the subsequent quarters. We now believe we can deliver a stronger sequential growth in the subsequent quarters than we originally anticipated.

Before I turn the call over to Alon, I would like to personally invite all of you to join us next week for a virtual investor event in which we will share additional highlights of our strategy, execution plans, goals for our software workshop business line and our longer-term financial goals.

Kornit is in a remarkable position, and I'm more confident than ever in our value proposition, our leadership position and our dedicated people. I look forward to seeing all of you, virtually, next week. Now I will turn the call over to Alon for a closer look to our numbers and our guidance. Alon?

Thanks, Ronen, and good morning, 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 results. A full reconciliation of our results on a GAAP to non-GAAP basis is available in the earnings press release issued earlier today and on the Investors section of our website.

Now let's dive into the financials. We are very pleased with our strong first quarter results, which, once again, exceeded our guidance on the top line and profitability. First quarter revenue increased 152.3% year-over-year to $66.1 million, net of $3.1 million noncash warrants impact and was well ahead of our guidance of $61 million to $65 million, excluding the impact of warrants.

Our first quarter results were driven by record shipment of our mass production DTG and DTF systems and execution of major global expansion projects with multiple strategic accounts. Services revenue for the first quarter was $8.2 million, net of noncash warrants impact of approximately $0.3 million, accounting for 12.4% of total revenue, an increase of 113.8% year-over-year.

The first quarter was strong in the Americas, with revenue more than doubling from the first quarter of last year and accounting for 68.3% of total revenue. Revenue from EMEA accounted for 23.7% of revenue and more than tripled from the first quarter of 2020. While Asia Pacific continues to experience COVID-related travel limitations, we are pleased with the rebound in sales, which accounted for 8% of revenue and more than doubled from the first quarter of last year. In the first quarter, we had 2 customers that contributed more than 10% of total revenue, and our top 10 customers accounted for 61.6% of total revenue.

Moving to profitability. Non-GAAP gross margin in the quarter, net of ForEx impact, rose to 47.1%, an improvement of over 14 percentage points year-over-year. On a GAAP basis, gross margin in the quarter was 46%, an improvement of 15 percentage points year-over-year. Our first quarter gross margin expansion is attributed to significantly higher mix of mass production systems and continued our acceleration of services profitability.

Moving to our OpEx items. I will discuss these items on a non-GAAP basis. We continue to invest in the business to accelerate growth. Each of the following line items reflect headcount additions and investments, supporting the growth opportunities ahead of us. Research and development expenses were $8.9 million or 13.5% of revenue compared to $6.1 million or 23.4% of revenue in the first quarter of 2020. The increase in R&D is a result of the accelerated investment in new products, innovative applications and use of materials. Sales and marketing expenses in the quarter were $9.9 million or 14.9% of revenue compared to $7.7 million or 29.4% of revenue in the first quarter of 2020. We continue to invest in expanding our go-to-market capabilities, marketing and brand awareness programs and customer-facing activities. General and administrative expenses in the first quarter were $5.8 million or 8.8% of revenue compared to $5.3 million or 20.3% of revenue in the first quarter of 2020. The mild increase in G&A cost is mainly related to additional headcount, professional services and facilities expenses and is a reflection of tight budget control and continued operational leverage as we scale our infrastructure. We ended the quarter with 700 employees, a year-over-year increase of 135 employees from the first quarter of last year and an increase of 28 employees compared to the previous quarter. For the remainder of 2021, we will continue to invest in growing the organization to support our business, mainly in R&D and sales and marketing.

Non-GAAP net profit for the first quarter was $7.7 million or $0.16 per share on a fully diluted basis compared to a loss of $8.9 million or $0.22 per basic share in the first quarter of 2020.

First quarter GAAP net profit was $5.1 million or $0.11 per share on a fully diluted basis compared to a loss of $10.1 million or $0.25 per basic share for the first quarter of 2020.

Adjusted EBITDA for the first quarter of 2021 was $10.8 million compared to negative adjusted EBITDA of $9.2 million in the first quarter of 2020. Net cash provided by operating activities was $5.1 million this quarter compared to net cash used in operating activities of $13.1 million in the first quarter of 2020.

We ended the quarter with strong backlog, including $23.7 million of deferred revenue and customer advances. We continue to expect the deferred revenue balance to convert to revenue in 2021. Our cash balance, including bank deposits and marketable securities at quarter end was $438.7 million compared to $435.9 million as of December 31, 2020.

Turning to our view on the second quarter of 2021. As Ronen discussed, we continue to execute on large global expansion projects with strategic customers and ended the first quarter with a strong backlog and great momentum in the business. We plan to continue investing in scaling our go-to-market and technology roadmap to capitalize on the massive opportunities ahead of us.

For the second quarter of 2021, we expect revenue to be in the range of $76 million to $80 million and non-GAAP operating income to be in the range of 11.5% to 13.5% of revenue. As it's been our practice in the past, these numbers assume no impact of the fair value of issued warrants in the quarter.

In summary, we are very proud of our Q1 results as we continue to execute on our strategy and are very confident in our ability to meet our $500 million run rate goal ahead of plan. We invite you to attend our virtual investor event next week, where I will share more insight into our long-term growth plans, and I look forward to seeing you all there. I will now turn the call back to Ronen.

Thank you, Alon. With that, we are ready to open the call for questions.

(Operator Instructions)

Our first question is from Jim Suva with Citi Investment Research.

Congratulations on really strong results and a good outlook. As the world starts to kind of hopefully get back to some type of post-COVID normalcy. In the countries that, say, are ahead of some of the larger countries, those that are larger -- I'm sorry, more ahead of the timeline recovery, the pandemic of the United States, whether it be Israel or certain parts of Europe.

Can you talk about the behavior of your customers in those regions? Are they phasing in production or are they doing older machines and using more ink consumption? Are they looking at newer solutions and your workflow processes. I'm just kind of wondering because it seems like Israel, has gotten higher vaccination rates than in the U.S. What the trends have been there versus, say, pre-pandemic actions?

Yes. Thank you, Jim. Great question. Actually, we'll refer more to North America where majority of our customers and revenue is coming from. And where they are also advanced in terms of vaccination. What we hear from our customers, so for the last 1.5 years or 1 year after the pandemic hitted us. They see a peak season, all the time and peak season. They see a huge demand coming, both from licenses flows, from retail, from brands directly to them. In terms of the workflow, we are working very closely with our customers, the fulfillers, but also with brands and licensors and retailers to connect between them. The trends in the market is moving into on-demand production, onshore or near-shore production to demand, production to order, leveraging Kornit technology and our fulfillers. Kornit introduce the custom gateway solution few months back, we see great traction, both within our installed base fulfillers and also with retails and licensors and brands, as I mentioned, but looking to change the supply chain into on-demand manufacturing, leveraging this workflow.

Our next question is from Rod Hall with Goldman Sachs.

I wanted to check a couple of things. First of all, are you able to give us a book-to-bill number? It sounds like the backlog is really high. But I was just curious how high. And then I also wanted to -- on Printful, just check the -- I mean, that's a lot of systems they're taking. I'm curious what you think the outlook for demand there is for systems, it sounds like it could be very substantial. So just wondering if you could talk a little bit more about Printful?

Yes. So in terms of the backlog, we are not specifying the level of backlog we have. We specified specifically the deferred revenue that we have. The only thing I can mention that the backlog is growing and it's in this peak ever in terms of backlog of orders. We have a strong, strong visibility for the entire year, and we are building our backlog already for 2022.

In terms of Printful, as I mentioned, we are working for them from the beginning when there were 2 employees with ideas. And we were going together from Latvia to the U.S., to Barcelona and other parts of the world, Canada and Mexico and many other parts. And they are growing tremendously. They are very successful in adding capacity. As we mentioned, they acquired -- they purchased 50 Atlas systems. We are in implementation phase. We just started it in Q1, but you will see the implementation going for the entire 2021. And we would believe that this is just the beginning of continued growth for Printful.

Okay. And then I just wanted to double check something with you on the Poly Pro technology. I think that you're calling it a MAX printer. But just curious on the supplies there. Are those supplies the same sort of value and margin of other supplies? Is there anything special about that? And it seems like it could be a little bit different supply story as you start to roll those printers out. And are you still on -- just double checking, you're still on track for kind of this summer for beginning to shift those systems?

Yes. So as for the MAX technology, we are going to roll the MAX technology to different platform. We announced the first product, which is the ATLAS MAX. And next week on our conference calls -- our investor conference call, we are going to share a bit more information on the future products that we are going to unveil within them, as you mentioned, is the Poly, we are going to bring the MAX technology into the Poly, leveraging also the Atlas platform.

This will be a breakthrough technology. I don't want to share more information about it because I would like to leave some of it for next week. Yes, in terms of the consumables, this is totally different consumables, the value proposition and the value-add that we are bringing to the market is immense. We're actually going to transform the market totally from analog to digital, leveraging our technology, and for that, we believe we can gain better margin, both on the system side, on the ink and also on the workflow.

Our next question is from Brian Drab with William Blair.

You mentioned during the prepared remarks that -- and I'm listening in to 2 different calls at the same time. So I apologize if I didn't hear it clearly. You said sequential growth throughout 2021 in terms of revenue, I think, is going to be better than you originally expected. Can you put a finer point on that? And what were you originally expecting. Can you remind us what you said? And what does that mean for the year? I guess, your guidance for second quarter is $76 million to $80 million. So we're looking for something well north of that, I guess, in the back half of the year as the quarterly run rate?

Yes, Brian. So as you know, we are guiding only one quarter ahead. We are not giving annual guidance. The statement that I was mentioning is that we, from the beginning, and we mentioned that this is going to be a very strong year. We had a very strong backlog of order, order also from big project with strategic accounts. Whatever we thought is going to be strong, is becoming stronger. So this is the message whatever we thought, but we are not providing guidance for the year at this stage.

Okay. So you did not say anything about sequential growth from second to third quarter, third to fourth?

No. No. I just mentioned we gave the guidance for Q2.

Okay. All right. And then, I guess, you'll talk about this more next week, but the gross margin kind of hovering around 50%. And I think that your expectation is still longer-term for gross margin to move above that level, maybe even to the mid or -- at one point, the goal was to get in the high 50% range. Is that still possible? And can you help kind of bring from 50% to where you're trying to get to?

Yes. So first of all, again, we were going to relate to it next week and our long-term goals in terms of gross margin. Alon is going to share in detail where we see ourselves in long-term from now. We are committed to close the 50% gross margin, as we said in the past. What you've seen this quarter, usually Q1 in terms of gross margin is the lowest quarter in terms of gross margin due to the mix between supplies to systems. Usually, Q1 supplies revenue is the lowest during the year and the Q4, the seasonality is that the supplies portion is the highest. Our gross margin on supplies is higher than the system. In Q1, this specifically, Q1 what you can see as well that we had a very, very strong growth on our system side, which also impact a bit on the gross margin, but you saw the gross margin, we are very happy with the gross margin of Q1 versus last year and even when you look in 2019. Alon, do you want to add anything?

So I think you covered it well. The 2 main factors that impacting the gross margin are the continuous improvement that we see and we push this business as quantities go up, operational leverage, and we plan to continue and increase the gross margin. And the second one is just one I mentioned, is the product mix. We had a very high mix towards systems in Q1. And typically, the second half of the year is more going towards the consumables where we have higher margins there.

Our next question is from Patrick Ho with Stifel.

Congrats on a nice quarter and start to the year. Ronen, maybe first off, you delivered really well in terms of systems during the quarter. I mean you talked about the strong backlog you have. Given some of the issues out there in the supply chain overall, how are you looking at any potential constraints and how are you managing through any of those potential situation, particularly as 2021 progresses?

Yes. Maybe I just would like to add something before. While the mix between supplies and hardware was trending into systems. In Q1, we saw a huge growth on the supplies. And actually, it was a record quarter in terms of supplies growth. So we see also a very strong supply growth. As for the supply chain, and the issues that we all familiar outside there. So first of all, we don't have any availability issues, looking forward for this year. There is no significant impact also on cost. We negotiated well in advance with our suppliers on cost and we don't see any significant impact from cost. Of course, there is a pressure on lead time because of availability of goods. But because we had a very good visibility for the entire year. And for the order, we place the orders with our suppliers well in advance and we don't see any issue with supply chain at this stage.

Great. That's helpful. And maybe as my follow-up question, in terms of gross margins, from maybe looking at it more from the systems perspective, you're posting better and better results in terms of the hardware solutions. Can you discuss maybe one aspect of it, particularly on the cost-out program. As your systems become more mature, you're taking costs out, as some of your newer products come out, you can take costs out of that. Can you describe some of the cost out efforts that are helping long-term gross margins?

Yes. So of course, there is across the board effort on cost-cutting and cost leverage, economical of scale, and we can see it. But when you are a growth business like where we are today, we are pushing stronger and stronger on the growth elements, which will impact much more on the gross margin overall. But of course, our operational teams working day and night to improve the cost COGS structure of every element of our solution. Alon, anything from your side?

No. I think that -- I mean, we see very good results on gross margin in systems. Again, Ronen mentioned, we are driving many cost reduction plans within the products. And on the supply chain itself, again, quantity is an operational leverage. And we see that we had very good results even when taking into account the mix within the systems between DTF and DTG.

Our next question is from Jim Ricchiuti with Needham & Company.

Just want to go back to your comments, Ronen, about the acceleration that you're seeing in the business. I mean it sounds like it's across the board. But what I'm trying to understand is are there particular areas that are performing, exceeding your expectations? I mean, you highlighted a few areas, Presto being stronger, the brands potentially moving faster. Can you give us a little better feel for what in particular are the biggest drivers to the acceleration that you're seeing in the business?

So Jim, great question. As you mentioned, we see it across the board. And the drivers is that we were talking about all those market trends for many, many years. People could see the future. The future becomes the present. Today, people would like to have sales expression, e-commerce becoming the main vehicle for sales, consumer would like to have a variety of products, and you need to change the supply chain. You don't want to have inventory, don't want to get to have waste and to throw 30% of your production because nobody is selling it. To do that, you have to move into on-demand manufacturing. We see it both in and DTG and DTF. We see it in our workflow business, which was designed exactly for that, we see it in the service business is growing tremendously and is very profitable now. And as you remember, we promised to be profitable for the first time in Q4, we bought it already in Q3 2020 and look where we are today. And our supplies is in a pick in terms of the growth because we're installing so many systems, and our customers are in peak seasons all the time. So overall, what's driving the growth or the megatrends that just now really in beginning of acceleration. And I believe it will continue for many years to come.

And Ronen, maybe as a follow-up, this is, I think, probably a question for you. It appears, obviously, based on the Q2 guidance being as strong as it is. You gave quarterly operating margin targets that I think were higher than most people were modeling. But as you see this growth accelerating, do we have to think in terms of potentially layering in higher operating expense in the back half of the year? Or do you feel that there's enough of an investment that you've made in customer support and as well as product development to be able to see this kind of leverage looking out to the back half? Not looking for a specific guidance, but just trying to gauge whether we need to think about higher operating expense levels as the business is scaling.

So we said that we will have leverage all the time, and you should see expansion on operating margin as well. Next week, Alon is going to share more detail long-term operating margin that we expect from the business. So we don't want to share more on that call. But Alon?

Yes, we are keep investing, and we will continue to invest and grow OpEx actually. I mean, we have good recruitment plans and mostly in R&D and strengthening the go to market. So we are doing it, and we will continue recruiting people and investing across the board also in the remainder of the year.

And this investment is very important. We just in the beginning of the trajectory of Kornit. The market is infinite from our perspective. We are only 1%. And to capture, to grab the market, now we need to invest in more people in the field, in more R&D, and you will see this investment. But we are committed to all of you that you will see the leverage into the bottom line.

Our next question is from Greg Palm with Craig-Hallum Capital Group.

I'll add my congrats as well. I mean, maybe just to start off, it'd be -- I'd be curious to know can you disclose how many global strategic customers you have at this point? I know in the past, we focused on one major one, and we're talking about the Printful expansion now. But are there others? I mean, presumably, this has been a pretty big driver, but curious how you're thinking about this dynamic is more of your customers sort of shift from regional providers to global ones.

Yes. So let's be clear and define clearly what we mean by global strategic accounts. So we have many global strategic accounts, okay? And we are not providing any specification of how many, but when we are referring to big global strategic account, this refer to Amazon, okay? We are not specifying specifically Amazon, but this refers to Amazon, the global strategic account. But we see expansion in our strategic account and the expanding globally. So Printful is a great example of starting in Europe, in Latvia, expanding to Americas, also expanding to Asia and growing as we continue.

Got you. But I guess my question is, how much of the recent growth has been due to that. Due to customers that maybe before were just selling in Americas, but now they're expanding globally or sort of vice versa. Has that been a big driver? I guess I'm really looking for some commentary kind of going forward as more of those customers branch out globally as well.

Yes. It's becoming a big influence on our growth. We can see it with -- as I mentioned, many of our key accounts, strategic account expanding globally, we will provide a bit more information on that on our call next week.

Okay. Great. And then notice that the warrant impact for this quarter was unusually high, at least quite a bit higher than the most recent run rate. Is that a direct attribution to higher activity associated with that big global strategic or there's other variables, I know that's impacted by stock price and a bunch of other stuff. So I was just curious.

Yes. The answer is yes. I mean the warrants at the end of the day are linked to the level of business and when business goes high, then the warrant impact goes as well to the same direction.

(Operator Instructions)

And our next question is from Chris Moore with CJS Securities.

Yes, just maybe start on ink. So as Presto really gains traction here, just kind of want to revisit the ink usage in DTG versus DTF. How would you compare the typical ink usage in the Atlas versus the Presto. And the margins any different?

Yes. So we -- the use of ink on the Presto is much higher than the Atlas. We will provide a bit more information on that next week on our call and compare between the 2. The margin is different between those markets. And the margin on the Presto are lower on the ink versus the Atlas.

Got it. And just as my follow-up, keep on that theme. So you have talked in the past kind of a basic metric is for $1 of system sales, you can do $2 follow-on consumables and services over the next 5 years. Does that math -- is that math the same for Presto?

For Presto, it's bigger, and we will provide more information on that, next week.

Our next question is from Brian Drab with William Blair.

Ronen, I'm not trying to be difficult, but my e-mail inbox lit up with about 6 or 7 e-mails after I ask my first question around sequential growth throughout 2021. I think in your prepared script, at least based on all the clients that are telling that they heard the exact same think I did. I think you said you expected sequential growth throughout 2021. And I just wanted to give you another opportunity to address that, given I think it was in the prepared remarks. And not only did you say sequential growth throughout the year, but I think you said better than accelerating more than previously expected as well. Is that -- and if I just heard that wrong or we all heard that wrong in the prepared script, I just wanted to make sure we clarify this query on the public call.

No, no. So you probably heard it right. As I mentioned that the sequential -- you will see sequential growth moving forward every quarter, which will be higher than what we anticipated before. We didn't share before what we're anticipating because we are not guiding for the year. We're guiding only one quarter. So you can see that the guidance, for example, for Q2, is probably much higher than what the market expected and also much higher than what we had expected initially for Q2. The same thing we see right now for Q3 and 4, which will be higher than what we anticipated when we entered to the year.

Okay. And are we saying, though, that we expect sequential growth from the second quarter to the third quarter? Or is it that -- I guess that seems obvious, but I just want to make sure that I'm getting it correctly, you wouldn't expect that third quarter or fourth quarter would be down as we move through the year sequentially, would you?

I would say like this, again, we are not providing guidance for the year. But you should assume that H2 will be higher than H1.

And we have reached the end of the question-and-answer session.

I will now turn the call over to CEO, Ronen Samuel of Kornit for closing remarks.

So I want to thank everyone for joining us this morning. We are very pleased with our first quarter results, which exceeded our expectation for top line growth and profitability. We believe that the remainder of 2021 will be no less exciting for Kornit. We look forward to sharing our strategy, execution plans and groundbreaking innovation at our upcoming investor event and hope to see many of you virtually next week. Thank you very much.

And this concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation.