© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings, and welcome to Kornit Digital's Second Quarter 2023 Earnings Conference Call. As a reminder, this call is being recorded.
I would now like to turn the conference over to your host today, Mr. Andrew G. Backman, Global Head of Investor Relations for Kornit Digital, Mr. Backman, you may begin.
Thank you, operator, and good day, everyone, and welcome to Kornit Digital's Second Quarter 2023 Earnings Conference Call. Joining me today are Chief Executive Officer, Ronen Samuel; Lauri Hanover, Kornit's Chief Financial Officer; and Amir Shaked-Mandel, EVP of Corporate Development. For today's call, Ronen will provide comments on the second quarter of 2023. Lauri will then review the second quarter numbers and provide our third quarter outlook before we open it up for Q&A. Before we begin, I would like to remind you that forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other U.S. securities laws will be made on this call. These forward-looking statements include, but are not limited to, statements relating to the company's plans, strategies, projected results of operations or financial condition; and all statements that address developments that the company expects will occur in the future. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause results to differ materially from those implied by the forward-looking statements. I encourage you to read the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 20-F, which was filed with the Securities and Exchange Commission on March 30, 2023, which identify specific risk factors that could cause actual results to differ materially. Any forward-looking statements are made concurrently, and the company undertakes no obligation to publicly update any forward-looking statements, except as required by law. Additionally, the company will be making reference to certain non-GAAP financial measurements 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 also posted on the company's Investor Relations website.
At this time, I would like to now turn the call over to Ronen. Ronen?
Thanks, Andy, and thanks to everyone for joining us on today's call. Earlier today, we reported second quarter revenues of $56.2 million, in line with the guidance we provided in May, which, as a reminder, included the impact from the fair value of issued warrants. During the quarter, impression grew at a double-digit pace year-over-year for the second consecutive quarter, driving a steady improvement in capacity utilization. Consumable revenue grew at a strong double-digit rate across our customer segments, including key strategic accounts and throughout all our operating regions. So far, in the third quarter, impression growth is again on pace to increase at a double-digit rate year-over-year, which give us confidence in solid consumable growth for the second half of the year. Our services business also continued to demonstrate exceptional revenue growth during the second quarter and so far during the third quarter as our customers actively upgrade and transition to our MAX technology. We are very pleased with the customer feedback we have received on our MAX technology and anticipate additional upgrades orders during the second half of this year and throughout 2024. Along this year, services have improved considerably, both in terms of revenue generation and an increased operating efficiencies. System sales volumes remained soft during the quarter, mainly due to continued challenges in capital equipment spending and as our customized design customers continue to work through excess capacity. While we anticipate the prevailing softness in system sales volumes to continue in the short term, we have implemented strategic measures to attract new customers, including brands, retailers and digital platforms. Additionally, we are targeting new growth regions within key textile production hubs to diversify our customer base and establish a healthy pipeline for 2024 and beyond. In addition to diversifying our customer base and entering new markets, we have taken various actions to increase efficiencies throughout our operation. Based on our progress to date, we currently expect to approach breakeven on an adjusted EBITDA basis for the fourth quarter of this year, even at a quarterly revenue run rate in the mid-$60 million range due to a favorable sales mix of higher-margin consumables and quarterly OpEx in the low to mid-$30 million range. We are also aiming to deliver profitable growth for the full year 2024. As a result of our focused R&D, marketing and other efforts, we had a hugely successful ITMA trade shows in Milan. We had a very high customer engagements with new customers from key textile regions, such as India, China, Turkey, Morocco and from Latin countries such as Argentina, Brazil and Mexico. We also secured a high number of quality leads and sales orders for both direct-to-fabric and direct-to-government systems. For example, at ITMA, we signed a deal with one of the top textile manufacturers in India, which we are planning to deliver in the third quarter. This new relationship opens up a new market for us in India, a market we believe has a potential to meaningfully grow over the next several years. Approximately 60% deals signed were from net new customers opening the door for additional systems, consumables and services sales, providing us with healthy pipeline for 2024 and beyond. The level of energy and innovation Kornit brought to ITMA was incredible with hundreds of customers and prospects, providing favorable feedback for our portfolio. We also unveiled our new Apollo high-throughput platform and secured several new orders. We expect to recognize revenues for the Apollo in the first quarter of 2024 and are currently focused on building a substantial order backlog for the full year. During the second quarter, we installed our first beta system in the U.S., which is now up and running, and we are in the process of installing the second beta in this region. As we have stated previously, the Apollo platform has the potential to provide us with annual consumable and services revenue of approximately 1 million per system once installed and running at high utilization rates. In summary, we have built solid foundation for future growth. and Kornit's long-term growth drivers remain firmly intact, a view reinforced by our recent experience at ITMA. We have made substantial progress throughout the first half of this year as evidenced by our successful introduction of new technologies and solutions. Our MAX platform has been well received by the market becoming the new standard in the market. Our quality of print, XDi capabilities and our ability to sustainably print white on dark fabrics have opened up new markets and driven increased customer interest and engagements. As a result, we continue to diversify our business and bolster our pipeline. We have also materially adjusted our cost structure and operations, reallocating resources to further enable growth engines such as launching the Apollo platform and capitalizing on growth opportunities in new markets to our direct to fabric business. We remain confident that our strategy, product road map and solid balance sheet position us well to generate meaningful long-term growth. On a final note, this morning, we issued our third impact report, which highlights our activities and the progress we made on Kornit's long-term impact strategy, demonstrating our commitment to a more sustainable fashion and textile industry. With that, let me turn the call over to Lauri for a closer look to our second quarter financial and third quarter guidance. Lauri?
Thank you, Ronen, and good day to everyone. As Ronen mentioned, second quarter revenues were $56.2 million, in line with the guidance range we provided in May. We experienced strong double-digit year-over-year revenue growth from both consumables and services, yet as expected, meaningfully lower year-over-year system sales drove the low single-digit decline in total revenues as compared with the same period last year. In the Americas, year-over-year growth was attributable to a double-digit increase in consumables across strategic accounts, and again, a strong quarter of services growth contribution due mainly to MAX upgrades. In EMEA, while consumables growth was robust due to a larger installed base and increased usage, the year-over-year decline was driven by lower system sales as customers continued to encounter financing challenges. We continue to explore ways to support qualified buyers to secure financing and now have a number of third-party financing partners lined up. We continue to seek additional partners who understand our business and how the company's solutions help our customers. The APAC region also experienced healthy consumables and services growth as compared with the same period last year. As Ronen said, we continue to develop a meaningful pipeline of long-term growth opportunities in this region, especially in key textile producing countries such as India and China. Moving to margins. Non-GAAP gross margin was 36.1% compared with 38.6% in the same period last year. Lower system sales volumes drove the year-over-year decline in gross margin even as higher margin consumables grew nicely and as the profitability of services meaningfully improved. We continue to expect gross margin improvement throughout the balance of this year given the historical cadence of consumables as a percentage of sales being progressively higher in the third and fourth quarters. Turning to expenses. Total second quarter non-GAAP operating expenses were $34.1 million, down approximately 16% from $40.7 million in the same period last year. The year-over-year decline primarily reflects the impact of our previously completed workforce reductions and lower marketing spend. As a result, adjusted EBITDA loss for the second quarter of 2023 was $10.7 million, an improvement as compared with adjusted EBITDA loss of $15.7 million in the same period last year. Adjusted EBITDA margin for the second quarter of 2023 was negative 19%, again, in line with the guidance range we provided in May. Our cash balance, including bank deposits and marketable securities at quarter end was approximately $592 million. Cash used in operations during the second quarter was $15.5 million, driven primarily by the operating loss and changes in working capital. Accounts receivable increased due to the timing of collections as well as a higher balance associated with extended payment terms to select customers while inventories declined sequentially. We continue to remain focused on improving working capital to drive cash conversion. Since the beginning of the year, we have repurchased approximately 938,000 shares under our share repurchase program for an aggregate amount of $21.8 million, resulting in an average price paid per share of $23.20. The initial 6 months court-approved period for the company's share repurchase program of up to $75 million expired on June 15. We have applied for and received a new approval from the Israeli court covering the unused balance of our previously authorized share repurchase program for an additional 6-month period. Given our strong balance sheet, we continue to believe that we can opportunistically repurchase shares without impacting our ability to execute the company's growth initiatives. Turning to third quarter guidance. We currently expect revenues for the third quarter of 2023 to be between $58 million and $62 million and adjusted EBITDA margins to be in the negative 6% to negative 13% range. As a reminder, the guidance for revenue and adjusted EBITDA margin includes the impact of the non-cash expense associated with the fair value of the company's warrants to our largest global strategic account. As Ronen mentioned, we currently expect to approach breakeven on an adjusted EBITDA basis for the fourth quarter. And before I hand it back to Ronen, I want to announce that Andy Backman, our Global Head of Investor Relations, will be leaving Kornit at the end of this month to pursue a new opportunity. Since joining Kornit, Andy has played a pivotal role in leading and transforming our Investor Relations program, establishing it as a world-class program and operation. He will be greatly missed, and we thank him for all his many accomplishments and contributions to the company and wish him only the best in his new endeavor. We are also excited to announce that Jared Maymon, who is here with us today in Israel will be assuming the role of Head of Investor Relations. Jared comes to us from Berenberg Capital Markets, where he covered Kornit as a sell-side analyst for the past 2 years. Jared, welcome aboard, and we all look forward to working with you in Sarkis. With that, I would like to turn it back over to Ronen to open the call up for Q&A. Ronen?
Thank you, Lauri. Operator, we are ready for the Q&A session.
[Operator Instructions] Our first question comes from Erik Woodring with Morgan Stanley.
So good to see the uptick in impressions and improvement in utilization, both in 2Q and now some of this early data that you're pointing to in 3Q. Maybe just based on your investor conversations and any kind of telemetry data that you have, any way that you can kind of gauge where you think average utilization might be today? And how long that does that mean your customers can continue to sweat their assets before they really start to expand capacity? I would love if you could just double click on that and then I have a follow-up.
This is an excellent question. It really depends on the type of segments we are looking into, okay? So when we're talking about utilization and under-utilized, mainly we refer to our customers in the customer design. Where they saw a huge peak during 2020, the second half of 2020, '21, and then they invested a lot in many new systems, and they saw the downside at 2022. What we see in Q2, and we saw it already in Q1, we saw them increasing volume. Some of them actually going into double-digit growth across our installed base, we see double-digit growth, not only in the strategic account but across all our installed base. And we see it also in the supplies revenues. Overall, we see a good improvement on the utilization. However, we will need to wait for the peak season and to see that they're getting into high utilization in order for them to reach to a point that they need to invest in additional capacity. We assume that those key customers on the customized design will get into this cycle only next year after the peak season after they have a better visibility. Currently, the trend of supplies continue to be very positive across those type of customers. On the other hand, we see customers that are in different market segments, if it's in the DTF, direct-to-fabric, or if it's in the replacement of the screen market, there, we see massive growth in specific customers across U.S., EMEA and Asia Pacific. We see them adopting the MAX technology, if it's at a smart and in the future, we will see it also on the Apollo. We see them growing very rapidly and actually we can start to see them buying additional systems and going. So as I mentioned, it depends on the different markets. But overall, we see a very positive trend.
No, that's super helpful. Thank you, Ronen, for that color and that bifurcation between DTF and DTG. In your prepared remarks and in the press release or presentation, you mentioned a strong pipeline for 2024 and beyond post ITMA, can you maybe just double-click on that comment and talk about some of the devices that saw some of the strongest interest at ITMA. Any new trends that emerge that you think are important for all of us to think about? And then any kind of advice or guidance that you could provide us in terms of how to think about the timing of revenue recognition for any of those new products that are now in your pipeline?
Yes. So that really is for the impression on ITMA, ITMA was incredible successful event for Kornit. We saw, first of all, from the market trends, we saw all the market trends that we were talking for years really happening, customers and visitors that came to our booth, we are talking about how do they move into on-demand manufacturing. Onshore, moving to production onshore and nearshore sustainability becoming a big issue for the brands and retailers, and they're all looking for pigment solution. And by far, we have the best pigment solution. We met with hundreds of visitors, if it's brands, retailers, customer prospects are different partners. And the excitement of the solution that we have shown on ITMA was remarkable. People were amazed by the MAX technology. And the MAX technology is now the new standard, the new benchmark in the industry, everybody is talking about it, and it's taking us deeply into the screen market into the replacement market, which is a totally new market that we never played there before. The ATLAS MAX plus with the additional capability of additional productivity, the Qualys, the XDi, really opening for us not only additional capacity within our customers but new market entries. But ITMA was very successful event for our ATLAS MAX Poly. ATLAS MAX Poly is gaining momentum within retailers, sports retailers and sports brands. We see it both in the professional sport, but also in the athleisure market. We closed quite a few orders of the Max poly, and we have a very strong pipeline moving forward into H2 and 2024. The Apollo was unbelievable success was running around the clock. People were amazed. For the first time, they can see a system that's running at 400 garments an hour and full productivity with one operator. This is a breakthrough for this industry based on MAX technology. We got multiple orders for the Apollo. As I mentioned, we're already running the beta and installing the second one. The feedbacks are great. This will position us deeply into the screen market, and we expect a substantial growth on the Apollo next year, the recognition of the units that we are going to install and we are going to install this year will happen on in Q1. Presto, Presto MAX with the new Ink, which focused on that black ability to print on that fabric with white ink open for us for the first time, really the fashion market, but also [ beyond the core ]. But more than that, for the first time, we are talking and we had a very strong funnel and opportunities within different hubs of textile market in the world. If it's in India, if it's in Turkey, if it's in Brazil, Mexico, we have a very strong pipeline going there, a lot of excitement. It was one of the hit of this event. Of course, we show the Tesoma dryers, the RSS, the KornitX overall, great feedback on our solution. And this show really shows us that focusing on customer design now for Kornit which gear on focusing on the replacement market, both in the direct to fabric, going after the replacement, which is a massive market, but also in the direct to government, which is a very big opportunity for us. We collected more than 1,000 leads during the show. Out of them, we already identified hundreds of opportunities, real opportunity. We qualified we follow up with those customers, hundreds of opportunities. We also got very nice orders and LOIs. Out of those orders and LOIs close to 50% of them already converted to PO or in the place to be converted very, very soon to PO. So 50%, we've never seen such a hypo-conversion. Actually, from all the deals that we got doing and the NOI 60% are from new customers. And when we look at the opportunities that we have is more than 90% or net new customer, which opened for us massive market opportunity moving forward. Overall, when we look at the show, we show there that one word is leadership, Kornit, we are the leader of this industry. And all the eyes are looking at Kornit. Now in terms of conversion, some of the deals we converted already in Q2, a few of them. You will see also in Q3 and Q4, but the majority will be only in 2024 throughout the 2024. Now we are in the process of really going one by one. As I mentioned, many of those leads become an opportunity as many of them are very, very hot. We're still facing macroeconomic challenges with the interest rate and people are waiting, some of them waiting for the peak season, some of them just waiting to see what will happen in the interest in the market, but they're all excited about our solution. They are all serious about it, and we believe that we will be able to convert many of them into 2024. We believe 2024 will be the year not only by scaling the Apollo and the new Atlas Max, the new ATLAS MAX plus and the presto MAX with the new ink. But it's the year that we will show, again, growth, and we will show a profitable growth in 2024.
Brian Drab with William Blair.
Can you talk about the upgrade timing, particularly at some of the bigger customers going into 2024 upgrade to MAX technology and also the Presto demand, which I know is there's a ton of interest in the Presto at the EMEA show. How many of those did you sell and or signed letters of intent for? And when do you, what's the timing like of the delivery of some of those orders and revenue generation?
So as regarding to the upgrades, we, H1 was very strong in terms of implementing upgrades from ATLAS to ATLAS MAX, some of it with our key customers some of it with smaller customers. We expect Q3 or another strong quarter for upgrades across the different regions. We do not expect Q4 to be a strong quarter for upgrades. Customers are very busy in Q4, and we do not expect to do an upgrade during Q4. So we are very, very busy right now completing all the updates as possible with our customers in Q3. We're already aware of customers at expecting to continue the upgrades in Q1 and Q2 next year. Some of them are strategic customer. As for our global strategic customer, we passed all the testing regarding the quality and the productivity, and we just expect waiting to get green light when to start the upgrades on their installed base. So those are regarding the upgrades. You will see it again in Q3 and first half of next year. Regarding the Presto, as I mentioned, Presto, what we have shown with the quality of the new inks that we present and the ability to print on dark fabric, with whiting, the XDi, open for us for the first time, the replacement market. Now let me explain what is the replacement market. Until now, we were selling the Presto mainly for customers that were looking for really short runs. Printing all kinds of could be fashion garments, so on and even on the coal shopfront. For the first time, we are now dealing with massive textile manufacturers in major hubs around the world that looking to transform the business to a more sustainable on-demand but not for short run, really for mainstream production.
And doing the calculation of the total cost of ownership, the ability to print on almost any fabric without any pretreatment, any post-treatment and washing, any waste of water fully sustainable, makes a lot of sense to many of them to move now to the Presto solution, our Presto Max solution. We will see a strong Q3 on the Presto. We expect a strong one. We expect also a strong Q4, but many of the deals or many of the opportunities that we got at ITMA and the deals that we signed at ITMA will be implemented only beginning of 2024. But we see a massive opportunity and a growth engine for Kornit for the first time, DTF direct to fabric is a real growth engine for our business.
Our next question comes from Tavy Rosner with Barclays.
I wanted to ask about Amazon broadly speaking, how the relationship going. And last quarter, you mentioned that some systems that they ordered haven't been shipped yet. So I was wondering if the need set and were installed. And if there's any update with other potentially upgrading their portfolio to systems like the Apollo.
Yes. So thanks for the question, Tavy. So with our global strategic customer, we have a very, very close relationship. And as I mentioned before, we're always working with them on long-term plans, 3 years plans and their business is doing very good. They had a great H1. We continue to see the momentum growing. So when I'm saying momentum is meaning in terms of impressions, number of impressions that is going without getting into numbers, but that's a strong double-digit impression that is going. As you all recall, last year, they were supposed to open new sites. We sold many systems, those sites were delayed. Finally, those sites are ready. We actually, in those days, we are installing on both sides, those many, many systems. So they will be ready for the peak season for Q4 to run. So we expect a massive growth in terms of impression from our global strategic customer into Q4 and definitely in 2024. As for additional capital investment, it's still within their internal discussion, there are multiple opportunity of capital investment and different time tables from them. One of them, we were talking about upgrading their fleet of ATLASES to ATLAS MAX. As I mentioned, they already did all the testing. Now they're even looking into the ATLAS MAX plus and potentially, they did all the testing, we passed them and they just need to give us the gain line to move ahead. So this is the internal decision of these global strategic customers, and we are waiting for it. Another opportunity is really to trade in the old fleets of other launches and trading them into the MAX technology. If it's the ATLAS MAX Plus or the Apollo. I can tell you that they are very excited about Apollo. They're looking at the future growth coming from this platform. As we mentioned in previous calls, they will be testing the Apollo very, very soon, so they will be able to gear up into 2025 with the Apollo. So this is another major opportunity. Of course, with these strategic customer, global strategic customer, there are other opportunity if it's with their fashion department or business and looking into both the direct to fabric. We see an opportunity also on the Tesoma dryers and other areas. So some massive opportunities, we are supporting them very closely. We are proud to be, to partner with them, and we are proud to see the growth moving forward.
Our next question comes from James Ricchiuti with Needham & Company.
Late in June, you announced the AMAZE deal. And I was just wondering if you could elaborate on that deal, whether it entails incremental units or is largely leveraging the existing fulfiller network? And what you see in terms of additional enterprise scale prospects for Kornit.
Yes. Thank you for the question. So it's an interesting deal, but it's another proof point for the direction that the industry is taking. We see massive opportunities with digital platform, a platform like Canva, like Wix and we announced the AMAZE. What AMAZE was important that they chose not only Kornit as the platform, but they chose a ATLAS MAX as the only platform that will print the decoration and the garments. So this is a very, very important message. As for the business is just starting, we already connected them with a few of the global fulfillment network. I can tell you that one of them already ordered a few systems because of this connection in North America, which is another testament to the value of connecting digital platform and demand generation to our customers that buying systems from us. So we expect and we believe that AMAZE will go. There's a big potential, not only in the U.S. but in Europe and Asia Pacific, and we support them like we support other digital platform like we're supporting brands and retailers. And the nice thing that we are connecting it to our customers, to our installed base buy more systems and more in from us.
Our next question comes from Greg Palm with Craig-Hallum.
I guess just starting off, it seems like the implied second half outlook in terms of revenue is a little bit lower relative to where we were 3 months ago. So I'm just kind of curious what's changed? How much of maybe some activity that you thought would have landed this year got pushed into 2024?
And then just as you sort of look at other ways to convert customers, I'm curious if you can give us a little bit more color on sort of financing alternatives. It sounds like you've maybe opened up that option. And I'm just curious if you think that could be a big driver of conversions going forward?
Yes. So thank you for the question. If you remember that we were talking about the visibility that we have for H2. And we always said that we have a kind of 70% visibility, which is coming from the supply the ink and from the services. And actually, as of today, the ink and the consumable is actually trending better than what we expected, and it's growing faster, which is a great method because it shows the health of the of our customers and ensure that they will need more system in the future. We're also trending better on the services and services revenue is growing faster and also gross margin looks very, very nice there as well and trending in a very positive way. The place that we are below what we expected in terms of total revenue is systems. Now on system side, let's look at it from 2 angles. One, in terms of, finally, we have really line of sight line of sight for pipeline. As before ITMA, we actually were almost blind how H2 will look like. Today, we have a very clear line of sight for H2 and beyond. We have the pipeline for 2024. We know who we are dealing, and we have a very, very clear order pipeline for the second half of this year. Some of the pipelines we wanted to convert after ITMA, we understand now that it will take longer and it will take us to 2024 mainly due to the macroeconomics. Customers looking for financing, some of them prefer to wait on the fence before they're jumping in. Some of them prefer to wait for the peak season and taking decision only after the peak season. So this is the reason why we are saying H2 in terms of system will be still a bit lower than what we wanted it to be. However, the good news is that we took measures in advance, not only the supplies gross margin or the gross revenue and gross margin, bottle supplies and services looks good, but we took measurements on the OpEx and we are going to reach a breakeven on an adjusted EBITDA basis, and we're going to approach breakeven on adjusted EBITDA basis in Q4. We feel very comfortable about it. As for 2024, as I mentioned before, we are aiming for a profitable and year that we will grow versus 2023.
And just to be that was a very helpful detailed answer. And just to be clear, on Q4 specifically, I think you had mentioned approaching breakeven on a revenue run rate that's now towards the mid-60s versus 70 previously. So are you effectively guiding revenue in that sort of mid-60s range for Q4? I just want to confirm that.
So we are guiding only for Q3. We are not guiding for Q4. We are saying that we can be both reaching a poaching breakeven in the mid-60s with OpEx in the low to mid-30s. This is what we believe that we can do. We are not guiding for that, but this is kind of indication where we see right now in the business.
Our last question comes from the line of Mr. Chris Moore from CJS Securities.
So it sounds like the ITMA conversion rate of LOI to purchase orders was quite high, getting better. Is there any way you can size the purchase orders to date.
We are not providing those numbers specifically. What I can tell you that Kornit today, after ITMA with the technologies that we bought both to the DTG and the DTF, direct to fabric is a different company, is much more diverse, much stronger than ever before. If you look at Kornit in the past, we were a company that 90% of our revenue came from the DTG, a lot of it from a few key customers, strategic customers, a lot of it from North America. Today, we are a different company, a company that did direct-to-fabric becoming a very, very important market and growth market. Within the DTG, it's not only the customized design. We are getting to the replacement market, which is much, much bigger and many of those deals now are going there mainly with, of course, with the Apollo and the ATLAS MAX. We are entering to new geographies, if it's India, China is growing Mexico, Turkey, Morocco, and many, many other hubs that we've never been able to get there because customer design was not relevant and replacement market is very relevant for them and each one of them is huge. We are getting to many, many new key customers, strategic customers, the deal that I mentioned in India is one of the largest textile manufacturers and potential to buy many, many systems only with these customers and definitely many others will follow. In China, we just installed in Q2 DTS in totally new application. I don't want to get right now to the application. We'd like to keep it confidential. But it's a totally new application, very exciting one with potential to tens of units at only these customers. It's a massive, massive customers totally new opportunity in new markets and new applications that we've never been there before. Other than that, we can see the growth coming from retailers, a few retailers that we are working with them are growing on a quarterly basis, both in impression and both in buying more systems. We can see the engagement with the brands totally different level of engagement.
Brands needs to move to all demand production, onshore production, sustainability becoming critical for those brands. And we have a high-level engagement with different tiers within the blend, the brands. Another market that we were talking about it for a few years. But finally, is growing is the sports, sports market with now with the Atlas Poly and we see it also with the Presto MAX getting to this market is a big opportunity, and we're starting to get orders and the pipeline looks great. Another market is on the core within DTS, that really now is picking up. So Kornit today is in a different space and the future starts now for Kornit. We promised to the market that we are going to be approaching breakeven 2023 was a year of transition for Kornit moving from H1 to H2, delivering all the products that we deliver into ITMA, bringing the business back into breakeven on adjusted EBITDA basis into Q4 and 2025 will be the year that Kornit will be back to profitable growth.
All right. 2024...
Yes. What do you say? 2024 will be the year that Kornit will be back to profitable growth, if I mentioned 2025, the mistake.
Mr. Backman, we have no further questions at this time.
Great. Thank you so much for your time and thank you all for joining us today. As always, if you should have any follow-up questions, please feel free to reach out directly. But Tony, will you please close the call. Thank you so much.
Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.