Okay, good morning. We're gonna go ahead and get started. I'm Brian Drab, the William Blair analyst covering Kornit. Before we get started, I have to, of course, remind you, you can find a full list of disclosures on our website, williamblair.com. Today we have CEO of Kornit, Ronen Samuel, with us. We also have Head of Investor Relations, Jared Maymon. Thank you both for being here. I'll just say a couple words about the company and then turn it over to Ronen. I think we're starting with a short video. Those of you in the room are likely familiar with the company, that Kornit is a leader in digital textile printing. They have direct-to-garment printers, also roll-to-roll, or as they call them, direct-to-fabric printers, and they really are a leader globally in this industry.
Of course, the industry has been challenged, ups and downs related to the pandemic. Customers added, you know, record levels of capacity to, you know, fulfill e-commerce orders during the pandemic, and then things slowed a little bit. But Kornit hasn't stopped innovating. They have a new machine out in the market that we're going to talk a lot about. I feel like my job as an analyst right now, or, like, the key job as an analyst of Kornit, is to really understand the economics of this new machine called the Apollo. It's a one-of-a-kind, you know, cutting-edge type of digital textile printer, and, well, I'll let Ronen tell you about it. I'm gonna get out of the way. We also have a breakout session, of course, following this, if you wanna get into Q&A. Thanks, Ronen.
Yeah. Thanks a lot, Brian. Great to be here. Good morning. Let me see where I can stand. So, today on my presentation, we are going to go over a bit on the latest market trends. We're going to talk about the Kornit, a bit about the history, but mainly where we're going moving forward. Let's start with a quick video and jump ahead to the presentation.
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All right, we're ready? So, let's talk a bit about the textile fashion market. And this is one of the biggest industry, about $2.5 trillion industry, that's going through a massive transformation. We waited for it for decades because it's one of the most polluted and inefficient industries. Cycles of production is usually taking, like, 18 months of producing apparel and textile, in China, Bangladesh, trying to forecast what we are going to wear next year. In today world, it's impossible. Trends are changing by the minute. Social media is defining what we are going to wear today, tomorrow, and brands has to react very fast to the latest trends. So no more being able to produce large quantities and ship them all over to US.
What we see today is a massive move of production onshore or nearshore, to be closer to the consumer, to be able to react very fast to market trends. So this is a major, major change. On top of that, if you look about us, and you look around the tables, you know, 10 years ago, we were all wearing suits, blue shirts, and so on. Today, everybody looks different. Why? Thinking about also our kids, they would like to express themselves. When they're going to a party, nobody wants to wear the same thing like their friends or the gym or and so on. So what does it mean? It means that there's endless amount of product out there. The SKUs, an endless amount of SKUs and product lifecycle is changing by the minute, which mean that everything is moving short runs.
If in the past, 10 years ago, the production was for long, long runs, the same products again and again, now product is changing very rapidly, and it mean that moving short runs. Another big change to this industry is about sustainability. And we were talking about it for many, many years, but it's happening today. There's a new legislation, regulation that looking at this industry, because this industry is the second most polluted industry in the world. Two reason, one is consuming a lot of water and polluting the water around the world. The second is that it's creating a lot of waste. Actually, 30% of everything that being produced in China, Bangladesh, never been sold and thrown to the landfill.
So this has to change, and to change all of that, the solution is really to move into on-demand production, to move to production to what the consumer would like to wear, really production to order versus production to a forecast, a long-term forecast. A bit about Kornit, and I guess many of you are aware of Kornit. Founded in 2002. We have something like 760 employees, more than 1,200 customers all around the world. Some of them are the biggest name of companies that you're familiar with, of course, Amazon and Printful, and many, many brands and retailers that using our technology. And we see more and more retailers that moving production and manufacturing in-house, and we're going to talk about it in a minute.
We are dealing in a massive market, massive market opportunity in terms of the TAM, but also in terms of the SAM that we are targeting. As of today, our customers are generating something like 200 million impressions. When I'm saying impressions are printed, T-shirts or garments, 200 million. But the industry is more than 20 billion, in terms of just printed T-shirt on an annual basis. And when I describe all those trends, those T-shirts are being mainly produced in large quantities on screen machines that are not efficient, that cannot really react faster to new market, and are not sustainable. So there's a massive opportunity to move those production into digital, and Kornit is by far the best solution in the market, both on the direct to garment and in direct to fabric.
A bit more on the, on the company. We have a strong balance sheet with more than $550 million on the, on the balance sheet. Positive cash flow. We are generating positive cash flow in Q4, Q1, and we gave indication to the market that we expect to have positive cash flow moving forward. Breakeven, we were breakeven Q4. We will also be in Q1. We knew it. This was part of our forecast, and we said that for 2024, for the full year, we are going to be profitable on EBITDA margin for the full year.
So you should expect to be very soon in Q2, close to the breakeven, and Q3 and Q4, very nice profitability and gross margins really continue to improve, quarter after quarter. We did adjust our cost structure. Last year, we were at around $35 million of OpEx. Right now, we are at around $26 million of OpEx every quarter, and we believe that this is sufficient for 2024, for all the quarters during 2024. That's it, from the financial perspective and for the market size, and if you will have any question later on, I can touch on it. So let's talk a bit about what's going on with Kornit.
So Kornit is 21 years, and there's a lot of changes that happened with Kornit. From the beginning, we had a vision to change the industry, to make it more sustainable, on-demand, to unleash the creativity, and, of course, to be relevant to the consumer. And we started with really direct-to-garment equipment that could print 10 shirts an hour, and we could print only on white shirts. Over time, we've developed our technology in such a way that you can print on almost any garments and any fabric. Of course, with much more productive way. Today, with the Apollo, we can run 400 T-shirts an hour. We'll touch on the Apollo, but we improved a lot, the quality.
And when I say the quality is not only the appearance, it's also the durability. And today, for the first time, with the MAX technology, our quality is in par to the screen market, and even better than what screen can produce. So while our vision was always to go after the screen, the massive TAM that I was talking about, we always had limitation to go after this market because of quality. And we were focusing on the market that's called customized design, for consumers that would like to order one T-shirt, one T-shirt at a time. And over the year, Kornit was growing with customer like Amazon, like Printful, that enable consumer to go online to choose one T-shirt.
For consumers that choosing one T-shirt, the quality was sufficient, and they are very happy with the quality, but the quality was not sufficient enough to go after the retail market and to go after the brands that are very sensitive to the quality and durability. The MAX technology, for the first time, opened the door for us to enter to this massive market. Most of the impression are being done with the retailers and the brands, and now we passed the threshold of entering there. We see today that most of the growth that we have today is coming from really printing long runs with retailers, with brands, with screen printers, that replacing the technology, the analog technology, with digital technology.
So this is a very, very important, because you will see that Kornit, over almost 20 years, or a bit less than that, we're focusing on one market segment, which we enable it, but this market segment is very, very limited, and it was the market segment, which we call customized design, which is continued to grow. There was a peak during the COVID because everybody go online and order their own T-shirts. And after that, there was a decline because our customer bought a lot of machines, and then they had overcapacity. But over the last two, three years, we were focusing to take really our technology to much wider market opportunity, which is, fashion, retailers, brands, sports, and I'm going to touch on them in a minute.
What we've done in the last few years is really developing this MAX technology across the entire portfolio, both on the DTG and the DTF. The MAX technology, as I mentioned before, is a different standard of quality to the industry. Is by far the best quality that you can have on digital, but is as good as the conventional, the analog, in some cases, even better. If you need go photographic image, is much better to do it on digital. Not only on that, we improve the productivity, we improve the total cost of ownership, that we can go after very long runs of jobs and not only the one-off market.
So a massive change to our technology in the last 3 years, which position us very, very strong to capture a much bigger opportunity in the market. And I give you some example on the markets that we are going after. In the left side, you can see the customized design. This is where Kornit was focusing. 98% of our business came from customized design. Today, a lot of our businesses is coming from brands and retailers. I give you an example. One of our better customer is Zumiez. Zumiez, they're having few Atlas MAXes and they have a Apollo, and they're planning to buy even a second Apollo.
They used to work, it's a retailer with about 600 brick-and-mortars all over the US, and they used to outsource their jobs to a network of screen printers that were printing for them, and they were distributing it across the brick-and-mortars. The main issues that they had... They had two main issues. One, how do they know how much to produce? They didn't know. They are working with many creators that they creating designs, and they are targeting mainly young audience, and they need to change the design very frequently, but they didn't know which design is going to catch the audience. So sometimes they produce much more, and they were stuck with inventory. Sometimes they produce not enough, and they had more demand. So this is something that they had to change, the supply chain.
Also the time to market, while working with a screen printer, that took them three weeks, one month, to bring the product to the market. They decided to move, to bring the production really to the distribution center, to the floor in the distribution center. What they achieved by that is actually being able to produce same day or next day to the shelf of the brick-and-mortars. Instead of producing to an inventory or in the warehouse of the back of the brick-and-mortars, they're actually producing today to the shelf, and they're able to change the products on a regular basis, on a daily basis.
So if the shelf is getting down and the brick-and-mortar wants specific product, now they can produce it immediately and deliver, and we see it with many, many other retailers. We see a really nice growth going there. Sportswear. We are dealing now with many potential customer and existing customer in the sports market. If it's brands, retailers in the sports market, which is a very interesting growth engine now with Atlas MAX Poly, which enable us to print on polyester, it's opening up for us this market. Fashion. Fashion is massive. Fashion, Kornit was not there. Kornit was always in the DTG. In the last few years, with the MAX technology, we entered to the fashion market. What I'm wearing is the jacket that was printed on a roll-to-roll machine, and it's one jacket.
There is no second to it. Imagine that, you cannot do it with analog technology. Analog technology use reactive ink that require pretreatment, steaming, washing. Is a giant machine. To run those analog machines, you have to run thousands of meters. You cannot run 1 meter, or you cannot run 100 meters, thousands of meters, which create a lot of waste and consumption of water, tons of liters of water per meters. We are replacing it with our pigment solution that can actually print on any type of garment, any type of fabric, without pretreatment, without using any water. The machine is not connected to water.
You print, and then you cut and sew it to a product like fashion, like what I'm wearing, or a product that it could be for home decor, and home decor is also growing. So now you can design your sofa, and you have unique sofa, and you can design a hotel, and all the hotel is with unique design, and you don't need to buy the same product from the shelf that everybody's buying. So this is another big opportunity that we are going after, and we see growth there. There are also technical markets, like footwear. We are dealing now with a massive project in China, with the customers that produce the upper of footwear to all the sports brands that you all familiar with. This is a massive opportunity.
We are right now in the qualification of our technology to enter this market. It looks very promising. Think about it, when you print on the upper, it has to be super, super doable in terms of meeting, for example, -20 degrees to +100 degrees, being able to flex 25,000 times, et cetera, et cetera, scratch resistance. So we are going through it, and our technology replace many, many steps, an inefficient way and actually unleashing the creativity also in the footwear. Another market that we are very much focusing right now is really going after digital platform. What I mean by digital platform? Digital platform is like Canva, which is our customer.
It's like Spotify, it's like Redbubble, and many platforms that are actually selling their products on the web. Think about Spotify, they are selling, connecting between musician creators, to us, listening. And now you can go on Spotify and actually order a T-shirt from your musician. But Spotify doesn't want to deal with fulfillment and doesn't want to deal with printing or production, and we have developed KornitX, which is a black box that connect directly to any digital platform and can distribute the job to our customer, and they can produce it anywhere around the world in more sustainable way, because you don't need to ship the product from US to Germany. You can produce it locally in Germany or anywhere around the world.
So this is a massive, really, diversification of Kornit, which was very important, definitely after what we have learned in the, in the COVID, time. And those are just an example to show you on the different market, segments I was talking about. Apparel, this is where we grew, really printing on T-shirt, on, on, hoodies, and all those things. Now, you can do it with our technology, the MAX technology, you can do it with XDi. Really multiple layers. We are the only one that can do it. Even with an analog, it's very, very complex to do it, and this give us a huge advantage to the market and unleashing the creativity. Doing merch. Merch is very relevant also to corporation, but also to digital platform. There's endless amount of opportunity in the merch, business.
In the athleisure, I mentioned sports, this is a major focus, growth engine for us, leveraging both the, Atlas MAX Poly, but also the Presto MAX, technology. Taking it to the fashion, this is unlimited market, really massive. For the first time, we're entering to massive producer. If in the past we were in a niche, now we are selling to customers in India, in China, in, Latin America. Big, big manufacturers to replace the, reactive, ink. And home decor. Those are example, real examples from Milan, a home decor show, two months ago, that, one of the leading designer of the world really using our technology and showing that really create, and unleashing the creativity also on the, on the home decor. Let's talk about the Apollo. Brian was mentioned Apollo.
What you see here, guys, this is a game changer for the industry. It's a game changer. Massive industry, the screen market. For the first time, we can replace the analog world with the screen world with this machine. This is a factory by itself. A factory that can produce in an hour, 400 T-shirts or 400 hoodies with one operator. Usually, to run a carousel, you need at least two people on the carousel and another four people preparing the plates and washing, and so on. This replaces three carousels. So it's about replacing 20 people with one person in much higher quality, in productivity that can run every shirt, can be different or the same, as you wish. Full automation, the machine is changing, the...
not only the design, but also the size of the shirt, connected to a dryer that is a much dryer, that's much more efficient in energy. This is a game changer. We finished beta with 3 customers in North America. One of the customers that use it already placed an order for this year for another 6 systems. So we will have 7 systems this year. This customer is one of our largest customers, using many, many Atlas MAXes. Those Atlas MAXes running one-off, mainly one-off jobs. He bought those Apollos to replace his screen operation to run longer run. This is exactly the opportunity we are going after that, and he find it much more efficient, much more cost benefit to run it.
Another beta customer that use it mainly for the licensing world already placed an order for the second machine that is on the way to him. Another one, which I mentioned, is a retailer that using the Apollo, and the indication that he will place another Apollo order early next year. Super happy about the productivity. This retailer, the run length that he's putting on the Apollo is minimum 1,000. So he's running really, really long run, and it's much more efficient, cost benefit, a higher quality, and he can react fast to the market. Guys, this is a massive market that we didn't enter till today. We are talking about thousands of screen printers that they have 3 carousel in their facility, thousands around the world.
And now, for the first time, we are going after, and I'm super, super, optimistic and, and, and, excited about this product and this market. There's a lot of focus, and mainly now that we incorporating into it, the all-inclusive click model, which I'm going to touch in a minute. So, yeah. So now let's talk about the all-inclusive. What does it mean, the all-inclusive? So as you know, till now, Kornit was selling the equipment, was selling the machine. Machine like Apollo costs $1.8 million. Selling the ink over time, the customer always buying from us the ink, there is no other choice, and of course, customer is signing on a service contract. There are not many customers that can pay $1.8 million.
There are many customer that needs this machine because it will be more efficient to run, more cost-effective, but to take from the pocket $1.8 million or for Atlas MAX, $600,000, it's tough. Mainly when the market, with the interest rate of today of 7%, is not an easy choice. Moving to a new model, that telling customers, "You don't need to pay or, or you need-- you don't need capital," but actually moving them to OpEx versus CapEx and telling them, "The only thing that you need is to commit on a minimum volume on an annual basis." Now, you have this volume. You are running on the, on the carousels, you're running 1 million impressions.
If you can commit to move part of the 1 million impression and the minimum volume to the Apollo, we will place the Apollo. It include everything, include the machine, include the service, and include the ink. And you know what? You can use as much inks as you want for those machines. So no more being worried if it's the coverage is high or low coverage, and the benefit for them, that they know exactly how much every garment is going to cost them. It's a fixed cost for every garment, and they know from in advance that it's cheaper than producing it on analog. So from the first day, they're saving money. They have a cash flow, but they don't have the cash to invest in $1.8 million of equipment.
This actually opening for us any door in the market. It's reduced the last barrier. The first barrier was quality, we passed it. Yeah? Second barrier was really being able to put a TCO meeting going after the long runs, we passed it. Third one is really the capital barrier, that people think 10 times before investing, and now we are passing it, and this will open for us and still is, it is opening for us many, many doors. And of course, we mentioned that we will come in September and share with our investors, how the model is evolving our business. We start to talk about ARR and total contract value.
The contract that the customer is signing is for 5 years on minimum commitment, and it's this model on the Apollo is generating for Kornit $1 million per year. So on a 5 years contract is a $5 million. This is minimum. Customer can print above that, and they have incentive to print above the minimum because if they are printing more than the minimum, actually, they're paying less per impressions. So, it's a very, very, profitable model for Kornit in terms of gross margin, at least as good as what we have today, if not better. We have really now moving to recurring. We have a clear view for the next 5 years on each one of those sales. And there's other advantages. Think about how does it look in our books.
We're actually depreciating the machine on 5 years, but after the 5 years, the machine is still in the field, and then the margin is getting even better. On top of that, we are controlling the second-hand end market because the machine belongs to us. There's tons of advantages for Kornit, and we have a strong balance sheet to make it happen. So we are moving very fast on that. We started with the Apollo, now we're looking also to the Atlas MAX in the same model. Direct-to-fabric. Direct-to-fabric is another major strategic direction for Kornit. Direct-to-fabric market for us, in terms of the SAM, is at least 10 times bigger than the market direct-to-garment. We are putting a lot of effort to go after this market.
You will see more innovation, and this is a disruptive technology that replacing the the dye-based technology. I will finish because I'm running out of time. Just to remind everyone, you as investor, the value of Kornit. First of all, we are talking about massive market opportunities that right now is going through a huge disruption. Onshore production, just-in-time production, sustainability, all of this, this is exactly the tailwind that the driving us. Disruptive technology, MAX technology, finally, we have it. We are ready. We enter into this market. Strong customer base, more than 1,100 customers, and it's growing and very happy. So, this is a massive opportunity. Segment and market, we were focusing on one segment in the past. Now, you saw many new segments that we are entering and much bigger segment than before.
Recurring business model. Today, about 70% of our revenue is already recurring. We have very, very clear focus on the recurring revenue, and moving to the all-inclusive, even going to increase the recurring revenue for Kornit. Moving back to profitable, so the last two years, we were losing money. It was tough. Now, we adjust cost structure. We are moving back to profitability. We're generating cash every quarter, and we have strong balance sheet, both to do thing like all-inclusive, to look at some inorganic activities. The company is in a very strong position right now with all those changes. So thank you very much for listening, and looking forward to see you in the breakout session and to hear your question. Thank you.