Hello. Welcome to the Kornit Digital Second Quarter 2021 Earnings Conference Call. Please note this conference is being recorded. I will now turn the conference over to our host, Mr. Andrew Backman, Global Head of Investor Relations for Kornit Digital. You may begin.

Thank you, operator. And good morning, everyone. Welcome to Kornit Digital's second quarter 2021 With me today are Ronen Samuel, Chief Executive Officer; Alon Rozner, Chief Financial Officer, and Amir Shaked, Executive Vice President and Corporate Development. 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 SEC, including the company's annual report on Form 20-F filed March 25, 2021, 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 release published today, which is posted on the company's Investor Relations site. Now, I would now like to turn the call over to Ronen. Ronen?

Thank you, Andy. And thank you all for joining us on our earnings call. Before I jump into the review of the quarter, I first want to say that we are very pleased to have Andy recently joined the company as our new Global Head of Investor Relations. Andy welcome. So let's turn to what was another truly amazing quarter for Kornit across the board, a quarter where we significantly beat expectations. So tremendous top and bottom line growth posted very strong gross margins and ended the quarter with an extremely strong backlog and pipeline. We delivered total revenue of $81.7 million for the quarter, net of $6.6 million in warrants related to a global strategic account, significantly exceeding the high end of our guidance and reflecting a 118% year-over-year growth and 24% growth on a sequential basis. We saw a very strong growth not only in our systems and consumable businesses, but also in our service organization, which posted over 70% year-over-year growths. We again saw very strong growth with key customer, as well as with net new customers in our pipeline has never been stronger. During the second quarter, we completed beta testing and began shipping of Atlas Max systems. We are seeing very strong order backlog for the Max and have received excellent customer feedback not only on the increase productivity and unique XDi capabilities, but also on the unparallel print quality and durability, which is truly on another level in the industry. Max upgrades for the Atlas installed base will be available in the first quarter of next year, and we expect significant revenue contribution from those upgrades next year. We continue to experience strong tailwinds as it comes to the market adoption of our DTS micro-factory solutions, as leading global brands continue to embrace the…

Thanks Ronen, and good morning, everyone. As Ronen said, we are very pleased with our very strong second quarter results. Revenue increased 118% year-over-year and 24% sequentially to $81.7 million net of $6.6 million non cash warrant impact. Revenue was also well ahead of our guidance of $76 million to $80 million, which excluded the impact of warrants. Our second quarter results were again driven by strong orders for DTG systems, in addition to increased demand for consumables and services. This significant growth was due in part to continued momentum with strategic accounts, which we expect to continue into the second half of the year. Services revenue for the second quarter was $9.5 million, net of the non cash warrant impact of $0.4 million, accounting for 12% of total revenue, an increase of 70% year-over-year, and 16% sequentially. Our Top 10 customers accounted for approximately 64% of total revenue. Geographically, all regions were up both year-over-year and sequentially. The Americas and EMEA regions more than doubled their prior year quarter revenue and accounted for 71% and 22% of total revenue respectively. While Asia Pacific continues to experience COVID related travel limitations, we've been able to successfully manage the business. Revenue in Asia Pacific increased 56% from second quarter of last year and accounted for just under 7% of total revenue. Moving to profitability; non-GAAP gross margin for the quarter net of the impact of the warrant was 48.2%, an improvement of over 400 basis points year-over-year. On a GAAP basis, gross margin in the quarter was 47.2%, an improvement of over 500 basis points year-over-year. Second quarter gross margin expansion was due to the increased mass production system sales, strong consumables, as well as continued profitability from our services business. Going forward, we expect the ongoing shift to higher mix…

Thank you, Alon. And now we're ready to take questions from the audience.

[Operator Instructions] Our first question is from Rod Hall with Goldman Sachs.

Yes, good morning, guys. Good evening, I guess and thank you for the opportunity to ask the question. So I wanted to, I guess a comment. I mean, the revenue numbers here look very strong. The KornitX backlog to us seems very exciting. You're talking about 80 implementation projects in backlog. And we know that could be a huge driver of the business in the future. Just curious what the timeline on those is, how long does it take to implement those? And when do we see those impacting numbers? And then I have a follow up question.

Great. Thanks, Rod Hall for the questions. We see first of all, a perfect storm in the industry. We really believe that this is about time to change this dirty industry to on-demand sustainable way of production, in proximity production and KornitX is the driver for changing this industry. On top of that, of course, digitizing the production flow. Yes, we have a big, long list of orders for more than 80 projects right now, to implement the KornitX, both with fulfiller that would like to join the network was both with marketplaces with brands is huge interest also from the retail environment. So we are very, very pleased with the adoption of KornitX and the visions that we are driving, the change we are driving in the marketplace. Some of those projects are short term projects, meaning within 90 days of implementation, some of them will take longer. I would say about six months to nine months; we will be able to implement most of the 80 projects that are in the pipeline. In the meantime, we will, I'm sure we will gain some more projects. There are a few major projects there that we are driving like the Canva, a project that we expect it to drive tremendous amount of volume to our customers.

Okay, thanks, Ronen. And then my follow up on this is the margin guidance, EBIT margin guidance is below what we were expecting. And I just wondered if you could give us a little color on that? Is that because of all the implementation projects, you're doing that, the speed of delivery, et cetera? I just curious what drove that sequential decline in those EBIT margins in the guide. And I think it's also a year-over-year decline. Thanks.

So the key drivers for the gross margin, as we all know, I mean, firstly is the level of business, the mix and then go the OpEx and the investment in the organization. In Q2, we had great results. We had great operational leverage, and we continue to invest in the organization, our OpEx increased in Q2, as you saw, however, consider we are working alone to add more resources to accelerate the activities and we expect that to seek additional investments additional OpEx in Q3, together with a bit different mix in Q3, and which takes the operating margin back to the level that we expect, again, as according to our long-term plans, and continuous improvement of the operating margin.

So, are you a lot of you guys assuming some lockdown impacts there or is it just you're hiring to keep up with the growth? Or what should we think of is the main driver there?

Main drivers for what, again, please?

The end of margin guide for the difference between the margin in the Q3 guide and the Q2 actuals. Just curious -- is that you're hiring to try to keep up with all the growth, so you're adding personnel costs in there or is there some assumption of lock -- increase lockdown due to delta that drives out or just kind of what is the -- if we think about the main thing that drives it, what would that be?

Yes, so, in terms of the mix, we don't expect very different mix in Q3. So, the impact on gross margin from that side will be immaterial; we invest also in the COG related activities in service supporting the customers and also in building the system. So, overall, gross margin is not expected to be very different. And then the investment in the OpEx is going to be higher in Q3 than in Q2, and this is the main driver, yes.

Rod, just comments from my perspective, we see an expansion both on gross margin, and on operating margin, even if you compare it to last year, you will see expansion both on gross margin and operating margin, Q3 versus Q3, definitely Q2 versus Q2, the reason why we guided 12% operating margin to 14% of revenue, [Tech Difficulty] because we are intending to continue investing in OpEx, accelerating the growth of OpEx in order to continue to accelerate the growth of revenue, we see massive opportunity there. But as we promised to our investor, we are heading into 2026 with about 20% operating profit, and we feel confident about it.

Our next question is from Jim Suva with Citi.

Thank you. And I'd like to add also great results. Can you talk a little bit about lead times? First of all, lead times for procuring all the parts and equipment that you need for your projects products? Or is it getting better? Or is it stable? Is it getting worse? And then I have a follow up question. Thank you.

Yes, I started maybe Alon will add on top of that, we definitely see pressure on lead time lead time for some of the products getting much longer if it took us weeks, sometimes months and even year, a year to wait for some of their long lead items. Luckily, we have very, very good visibility for this year. And we have excellent visibility for next year. For this year, we don't see any limitation on delivery not on system not on part, not on ink. For next year, we already place the order with our suppliers for all the long lead time items so we don't see also any issue on supply chain also for next year. In parallel, we see some a price increase. Not too much impacting us on a big way. We feel we are in control but we see some price increase from our suppliers. Alon, anything from your side?

No, I think that the main point here is because of the great visibility we were able to secure production slot as well as the main lead times for quarters ahead. So we don't see any impact on supply at all. We do some -- we do see some impact on cost. But as of now it's not material to our business.

Great. And then as my follow up question, from the customer standpoint, their lead times if customers come in and want to order Atlas or something like that as an example, are those lead times starting to stabilize? And I assume we're looking at delivery dates probably now in the year 2022, as opposed to 2021? Or how should we think about the lead times from the customer perspective?

Yes, so it's a very good question. So with most of our strategic key customers we are working on one is [Indiscernible] with some of them even longer than that, we have a very clear visibility, and we are planning ahead of time. We, some of course, net new customers are coming. We are planning ahead of time inventory levels, and we have enough inventories to supply them if we're getting any surprise orders. So usually, we can be -- we can deliver a system within one month to two months of an odor, we are increasing production. In Israel, we already have three contract manufacturer, big contract manufacturer in Israel, Flex and Sanmina and another local manufacturer. And we are about to open another site outside of Israel next year, to increase the capacity and the growth that we see in the business.

Our next question is from Brian Drab with William Blair.

On Voxel8, can you talk a little bit about that acquisition? And just what you're acquiring there? I guess it looks like they have a proprietary print head seems like they have proprietary consumables, are you going to incorporate those print heads into your next-gen machines? And how long might that take? And have you done any calculations around how much that expands your addressable market?

Well, I'll say yes, and yes, of course. But, look, first of all, we are acquiring a great group of people. Super knowledgeable, great attitude, we feel that there is a great fit here in terms of culture, in terms of technology, and then a proprietary technology. With this technology, we can enhance our decoration capabilities; we can take it to many directions, we will be able to offer never before seen versatility of decoration, I would say something like let's talk about reflective, breathing reflective sports, apparel, breathing, high density, silicone metallic capabilities, we will be able also to print practical features such as enhanced [Indiscernible] from a compression materials for sportswear and therapeutics, cushioning and impact resistance and waterproofing. So it will open for us major opportunity both in the market that we are serving now and also new markets that we are planning to go out for ourselves always in the fully digitized single step production process of Kornit, so we are planning to embed their technology on top of our solution today, if it's the Presto, if it's the Atlas, and enabling our customers to enter to new application more capabilities. And for us also to get to new markets. At this point of time, we are not sharing the in case what is in case market potential in a later stage, we will start sharing the rollout of the application and the technology and by that to share being trace market that we see. I can tell you it's a huge market that we see in front of us as you can all see when you're looking at the Voxel8 website, they were focusing on the footwear market this is by itself is a huge opportunity -- future opportunities, not the first market that will go after. We have an immediate opportunity with marketers we are serving now like as I mentioned, that is reflective and metallic and we have a clear plan how to integrate it and to bring it to the market as soon as possible.

Right. Thank you. And can you make any comment on revenue 4Q versus 3Q given you have a little more visibility compared with the last time we asked that question?

Yes, so we are not guiding for Q4, we are guiding only one quarter, I can say that we have a full visibility for Q4. We feel very comfortable; it's going to be a very strong year for us. And more importantly we then are starting 2021 on the right foot. We're already taking order -- sorry 2022, Q1, we're already taking orders. We have a long list of customers that are asking for upgrades of their Atlas to Atlas Max and customers are asking to buy a new Atlas Max as well as the Presto, Presto Max, we are bringing the Atlas Poly automation so we have an exciting quarter in front of us in terms of growth and opportunities.

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

Hi, thank you. Just a question on the upgrade opportunity for Atlas Max, it sounds like you'll be beginning that in Q1. When would you anticipate just based on the interest level that you have now for upgrades from the existing installed base? When would you anticipate completing those upgrades? Would those go through a large part of 2022?

Jim thanks for the question. But just to make sure that the audience understands the value of the Atlas Max. So what we just ended better and we got amazing feedback from our customers. I'm very proud to say that one of the feedbacks was that finally Kornit is bringing a product out of the box that is mature, like a mature company. So we are very proud to be in this position. On top of that, all of them are talking about the quality, that bring qualities that is different standards is placing the quality in the different levels. Of course, the XDi in terms of the 3D dimension and opening to totally new application and new market. Of course, the productivities and many of our customers' also key customers were exposed to the automation and they're very excited. So it's a really huge benefit to our customers and to the market. And we expect to start upgrading our installed base Q1, as you mentioned, we expect materials revenue recognition already in Q1 for this upgrade for the installed base, as we have a large installed base of Atlas system with some big accounts that we know they are going to upgrade to the Atlas Max, it will take more than one quarter I guess it will take the entire 2022 to upgrade most of the fleet to the Atlas Max.

Got it, thank you for that. And then just with respect to the pipeline on KornitX, when you talk about the ADM implementation projects, are the bulk of those fulfillers, or I'm just wondering if there's any way to get -- give us a sense as to how that might break out between fulfillers, brands, marketplace. It's just some senses to how those that project pipeline looks.

So the good question, we are not providing the detail fleet on the 80s. I can tell you that a large amount of those 80s are fulfiller across the world, but they're joining but we have some big names of marketplaces, brands, retailers that also are part of those the implementation projects. At the stage we cannot share more split on those 80s orders that we have in place.

Our next question is from David Mizrahi with Berenberg.

Hey guys, congrats on the quarter. I just wanted to go back to one of the earlier questions. And can you just comment potentially on the order backlog and maybe the book-to-bill, I know you talked about 80 projects for KornitX. But what are some of the Atlas Max and your other more legacy systems so far?

Yes, so David, thank you very much. I cannot say too much on the mix and the type of customers as I mentioned both of those 80 projects, with fulfiller, our installed base that would like to join KornitX network. Some of those 80s are with big marketplaces, like Canva. And brands, retails and those are the main customers that would like to join the network on those 80 projects.

Okay, got it. And then also just I wanted to clarify, it sounds like the acceleration is going to be more broad based but are there certain areas that are stronger or performing better, I kind of just want to have a feel for what in particular, the biggest drivers to acceleration through the [Indiscernible]

Yes, so we've seen one of our very strong year. Yes, we're ready as I mentioned, focusing on 2022. On all the new products are coming in Q1, we see perfect storm, perfect storm in many direction, first of all, from the market, market trends online is continued to booming. Sustainability is becoming the main discussion with every brand. They own demand manufacturing is super important. Consumer really wants to have variety. So it's really a perfect storm from the market trend, but if you ask from a business, how do we see, so we see a major growth, explosion, I would say, growth with our strategic accounts, across the board, that going within the current size that expanding, opening new sites, multiple regions, we see the growth also in the supplies that are using the system around the clock. And we see actually many net new customers joining. And this is great both from the brand perspective but new fulfiller that use traditional fulfiller are joining as well. DTF is definitely a major growth driver moving forward, we see the concept of micro-factory gaining momentum, both in the fashion world and in the home decor, absolutely Atlas Max and these events that we've done a few weeks ago created a massive funnel and opportunity for all of us for expansion this year and next year. Bringing up Voxel8 is another story and another value that we can bring to our customers and changing the industry into more on-demand sustainable way. We have massive events in front of us think about the New York Fashion Week; think about the Kornit LA Fashion Week, Printed United Fespa. Finally, we have face to face meeting with customers that will really create this momentum. And we're going to demonstrate all our technologies into those shows. And this is on top of a very, very strong pipeline that we already have. As you saw our guidance, if you calculated for Q3 is more than 50% growth year-over-year versus last year. And last year, Q3 was a very strong quarter for us. So we are very proud of the growth of the business and the momentum. And yes, we feel very comfortable about this year and next year.

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

Yes, thanks. This is Danny Eggerichs on for Greg today. Thanks for taking the questions. I guess maybe if you could just touch on progress with the big brands that you're working with and maybe how those partnerships are starting to materialize.

So, at this stage, I don't have much news to share with you other than we are working with endless number of brands, both on the KornitX, both of changing the supply chain into on-demand, some of them really buying our equipment, we announced about the Atlas in the UK, or getting into the micro-factory with the Presto, we announced about the relationship with Adidas. There's many, many multiple interaction and both within the brand. But as of today, I don't have some news to share with you that I can disclose at this stage.

Got it, that's helpful. And then I guess, congrats on the acquisition this morning of Voxlate8. In terms of the M&A pipeline looking forward, I guess, how are you guys looking at that?

Yes, so we are very excited. I think that looking at much different technology this group will report to the CTO organization, the CTO was very involved in defining what technology we are looking for and what will help us to bring new application to the market. We were evaluating Voxlate8 technology for few months; we found it suitable to print on garment together with our technology, the wet on wet, opening for us new application for the textile and home decor, both on the DTG and the DTF. So we see a huge potential for growth coming from this technology. As I mentioned, we are very pleased with the team there and the engagement having this team based in Boston, it's also a huge benefit for us. So to attract more talent to our team. So overall, I think it's a very strategic acquisition. And we will start seeing the fruit of this acquisition in the coming quarters.

If I can add, this acquisition is a great example of the accelerated execution that we are talking about organically and enormously of technologies that will support our business and will support our long term financial model. So this is exactly according to our plan to take us to the long term plan of $1 billion.

Our next question is from Tavy Rosner with Barclays.

Hi, good afternoon. Thanks for taking my questions. Most of them have been asked, I guess, just maintenance on Voxel8, I don't if you touched on it already. But is there any ongoing revenue stream that you will be maintaining going forward?

Tavy, thank you for the question. Yes, the company generating some revenue is not material to Kornit revenues. And as we are going to drive the technology to a bit different areas from where they are today. We don't see it any impact on top of the revenue, top line as we mentioned in terms of the OpEx t will add some -- something like $1 million OpEx expenses on a quarterly basis. But it was taking into account in our models, so we don't see a material impact on our operating profit as well.

Great. And then just looking at the growth when you look at this quarter, you look at momentum for the coming quarter. When you look at growth in general, would you say that the majority comes from incremental sales to your existing customer or conversely it is coming from new customer? How should we think of the split?

It's really a mix. As I mentioned that the explosion that we see with strategic key customers is something really unique. There continue to go and expand and buy more systems and ink and services when we are talking with them on long-term plans, even with some of them for three years length. So we are very optimistic there. On the other hand, we see many net new customers joining. On the DTF, of course is a relative net new segment for us new product line for us. And we are going up there, so most of them are net new but we see it also in the DTG many net new, we see net new coming both in our mature market like North America but we see it of course in Asia and in EMEA, across EMEA, EMEA has very good quarter, this quarter with growth both in the Central Europe, UK, Germany, but we see also Eastern Europe, Turkey, Spain, going very strong. We also see big potential in Latin America; mostly net new customers are joining in Latin America. So at this stage we are not scratching the ground with the potential of net news are joining us on top of the growth of our strategic customers, but expanding very fast.

Our next question is from Patrick Ho with Stifel.

Thank you very much, and congrats on the nice quarter. Ronen, first off, in terms of the Max upgrades you're talking about that will be introduced in the first quarter of 2022. Can you give a little bit of color of; are they the existing strategic plans that have been with you for a long time? Or are they recent new customers say over the past year or two that have bought the Max product? Where are you seeing the greatest traction in terms of the upgrades?

So the Atlas for the Max, first of all, for the Atlas installed base. Many of those Atlas installed base already within our strategic accounts, as you mentioned, but many of them also with customers that having only one of the two Atlas. We believe that it will most of them both our strategic account that we are talking to them and they were engaged in the beta testing and seeing the product in the lab and in the experience center will upgrade to Atlas Max. So we'll buy the upgrade. But we believe also the relative small customer with one and two system will also upgrade to the Atlas Max, there is a clear ROI for the upgrade. When you calculate the 20% production, when you calculate the quality and the variety of material, you can print all the new application that you can a print with the Atlas Max is so clear, and there is no question that they are really fast. And we expect most of our installed base to do it during 2022.

Great, that's helpful and maybe as my follow up question for Alon, you mentioned about the supply chain and how you're managing through that situation, it sounds like it's being managed pretty well. Can you talk about the COVID related costs? And what I'm kind of trying to get there is with some of the recent outbreaks, the situation changing again? Are you seeing any changes in logistics costs and freight costs? And is that part of what you're mentioning about some of the costs of pricing going up?

Yes, so in general, we see good impact, if I can say to the whole situation by the acceleration of the ecommerce and the development of our business. So this is in general, that the momentum is very positive for our business, specifically for the supply chain and logistics. So, yes, we see the pressure on logistic costs. But I think that it comes together with operational leverage that we are talking and we are able to deal with this increase enforced by moving more and more shipments doing it by sea rather than air and saving some costs. We have larger quantities so we can secure better slot and better prices for logistics. So all-in-all, we see some impact, but it's really minor. And I mean, as we can see in the results, it doesn't really impact our profitability or gross margin.

I would just say that I believe I seriously believe that our team is doing a tremendous job in working with our suppliers to control the increase of cost, and also the logistic costs when we are monitoring it while we see an increase in costs compared to benchmark, we are in a very good place. And we are very pleased on that. As we mentioned, and we are continue to be committed to that you will see expansion on a gross margin you saw in this quarter, you will see the rest of the year. And we will enter 2022 with the new products with additional expansion on gross margin.

Our next question is from Chris Moore with CJS Securities.

Hey, thanks for taking my question. Yes, maybe just back to the to the Atlas Max upgrade for a second. So I'm just trying to get a sense of the scale of the upgrade opportunity. Is there any way you can put kind of rough numbers around either the number of Atlases they're out there that could potentially be upgraded? Or just kind of sense in terms of kind of what that could mean from revenue perspective. Even you could choose any number 100% upgrade in 2022. Just have no sense in terms of what that might mean from a revenue perspective.

So, as you know, we're not providing the exact number of Atlases we have in the field, although we already mentioned a year ago we crossed the 200 Atlases that we have in the field, we mentioned it, of course, we have much more than 200 Atlases in the field, we expect a large portion of them to upgrade to the Atlas Max. And we expect material revenue coming in 2022 out of it.

Got it, I'll leave that one there. And just one last one for me, as DTF becomes a more important part of the mix. Can you talk a little bit more about kind of DTF sales process for CTG? Does DTF create any significant challenge, new challenges? Does it require much incremental sales infrastructure?

Yes, so first of all, it's a great question; we are having dedicated team that going after and selling the DTS, not only selling, supporting and the support is also application teams. We have business manager for the DTF. So it's totally different type of product line and customers that we are approaching with this -- with the DTF and the Presto specifically solution around it is totally different and also the value proposition. We are really looking here on enablement, enablement of on-demand manufacturing, which was not available and you couldn't do it with the traditional technology. [Tech Difficulty] pigment ink and acid ink which requires long process of pretreatment of printing then a steaming and then washing using lots of tons of water in this process. Really a lot of pollution and you cannot run it for 100 meters -- for hundreds of hundreds of meter in order to build a -- technology with the pigment ink with one step solution that you take any fabric you print directly on top of it, doesn't matter if it is blended, natural fabric cotton or polyester without pretreatment without post treatment. You can print one off dress, you can print one of cotton for the home is revolutionary and the industry now is moving into the coloration at home into a variety in fashion. We see the excitement of designers seeing that this technology. You will see the excitement in New York Fashion Week, in LA Fashion, Kornit LA Fashion Week of all those designer using the technology and now really can express themselves and more important for the consumer. They really for the first time they can buy and be unique with their designs needs. So we are expecting a major change in the industry. We are driving a major change in the industry. And we expect long-term growth coming from the DTF business.

We have one more question from Brian Drab with William Blair.

Hi, I'll be honest and say I was even confused by the fact that reporting and I think the data aggregators miss reported relative to how they had been for the last year and a half, your headline numbers, so I just want to make sure that I have this correct. And fact saying $0.22 versus consensus $0.22. But your revenue guidance for this quarter was 76 to 80. And apples-to-apples with that you did 88, right. And I just want to make sure these numbers are right. And you're adjusting for -- okay, correct. Adjusting for the warrants?

Yes. Thank you for clarifying, Brian. So if we take apple-to-apple, we are guiding without the impact of the warrant, we guided 76 to 80, we deliver more than 88. So it's well above what we guided well about what the market expected. And you can see the growth so far into Q3.

Yes, and your gross margin, I guess, would have been 52%. And your operating margin was 19. And adjusted EPS was $0.35 relative to consensus.

Right. Apple-to-apples on the operating margin, you should say 18%, 19% operating profit versus to the guidance. So it's well above what we guided last quarter on operating profit.

And $0.35 cents per share, yes.

Understood, yes. I mean, I just got confused, right, because for at least the last six quarters, they were reporting it correctly. And I just assumed it was correct. So I just want to clarify that since if I am confused, I assume there are at least a couple other people that might have been.

So it might help you, all of you. So it might help you all of you to look at the TR, there is a table that show the comparison with the impact of the warrant and without the impact of the warrant. It will clarify this.

Right. Exactly. And then can you just maybe give a quick update if there's any evolution to your thinking regarding how the best way to monetize KornitX? And is that business models that what can you tell us about the revenue model? Thanks.

So as we mentioned in the past, revenue more than these days is mainly based on transaction fees, the transaction is both on the impression generator, if it's a marketplace or brands, and also from the fulfiller. We are exploring different business model. We just recruited very strong COO into the company, and the COO together with the president of this business guy is looking into it. And will define the future business model. By the way the COO is, [Indiscernible] joined us and already we see amazing ideas coming from his perspective. So it will be too early to say that their business model is already set. I believe there will be different business models to different audiences. These huge opportunity there also business model around the data. We see some great potential in the future monetizing on the datas of these systems is generating, so please stay tuned, we would be able to provide you more information in the future. There are no more questions at this time. And I'd like to turn the call back to Ronen Samuel for closing remarks.

So I want to thank everyone for joining us this morning on this call. Although, this is afternoon in Israel, this is morning for the US. First of all, we'd like to thank our team for an amazing quarter for an amazing momentum. I would like again to welcome Voxel8 to the family of Kornit, to the going family of Kornit. We are very pleased with the quarter results, second quarter first half results, and fantastic results. But we even more excited about the many growth opportunity ahead of us about H2 overall, about how 2020 we're going to look like with all the new products in production and we look forward for sharing our progress with all of you after the LA Fashion Show, Kornit New York Fashion Show. So we have tons of excitement, also on KornitX to share with you in the coming months. So in the meantime, thank you all again, and looking forward to meet face-to-face soon. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation. Have a great day.