Greetings and welcome to Kornit Digital’s Fourth Quarter and Full Year 2021 Earnings Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Andrew Backman, Global Head of Investor Relations for Kornit Digital. Mr. Backman, you may begin at this time.

Thank you, operator, and good day everyone, and welcome to Kornit Digital’s fourth quarter and full year 2021 earnings conference call. With me today are Ronen Samuel, Kornit Digital’s Chief Executive Officer; Alon Rozner, Kornit’s Chief Financial Officer; and Amir Shaked-Mandel, Executive Vice President of 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 related to the company’s objectives, plans, strategies, statements of preliminary or projected results of operations or our financial condition, and all statements that address activities, events or developments that the company intends, expects, projects, believes, or anticipates will occur in the future. Forward-looking statements are subject to known and unknown risks and uncertainties, and are based potentially on inaccurate assumptions that could cause results to differ materially from those expected or implied by the forward-looking statements. I encourage you to review the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 20-F filed on March 25, 2021, which identifies specific risk factors that could cause actual results or events to differ materially. Any forward-looking statements are made as of this call hereof and the company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. Additionally, the company will be making reference to certain non-GAAP financial measures on this call. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company’s earnings press release published today, which is posted on the company’s Investor Relations website. At this time, I would like to now turn the call over to Ronen. Ronen?

Thank you, Andy, and thank you all for joining us to summarize an excellent year and review our strong business momentum as we enter what will be one of the busiest and most exciting years in the history of Kronit. 2021 will be remembered as pivotal year in Kronit's past to become a $1 billion company in 2026 or before. Our annual performance reflects outstanding execution on the huge market opportunity we are after and the strengths of our unique business model as we continue to exceed our growth and profitability goals across the board. We delivered remarkable year-over-year total revenue growth of over 65% and shipped a large number of mass production systems that will continue to fuel the growth of our recurring revenue streams for years to come. System sales grew over 100% this year and our recurring consumable and services revenues grew over 30% reflecting record growth of our customers. We also delivered an extraordinary operating margin while continued investing in the business. in 2021 we unveiled our 4.0 strategy and laid the foundation for the future growth of KornitX. We strengthened our team with talents in key leadership positions, scaled R&D and go to market functions across regions, scaled operations and infrastructure, launched groundbreaking technologies, unveiled state-of-the-art customer experience centers, and initiated innovating lead generation marketing platforms. We also leveraged our strong balance sheet to enhance our organic efforts to digitize the production flow with smart inorganic technological innovations such as Voxel8. For the fourth quarter, we again exceeded the high end of our top line guidance, and delivered record total revenue of $87.5 million net of $7.9 million in warrants related to a global strategic account. Our record recurrent consumables and services revenues were driven by an exceptional peak season, gross margin expanded versus last…

Thanks Ronen and good day to everyone. As Ronen shared, we ended an outstanding 2021 and entered 2022 with a strong backlog and robust pipeline, which gives us excellent visibility into 2022 and beyond. We had record revenue in the fourth quarter of $87.5 million net of $7.9 million noncash warrant impact related to a global strategic account, ahead of the top range of our guidance of $89 million to $93 million, which as a reminder, assumed zero impact of the warrants. For the full year, revenues were $322 million net of $25.4 million noncash warrants, an increase of 66.6% year-over-year. This was a very strong quarter for systems for both Atlas and Atlas MAX. Systems as a percentage of total revenue was one of the highest level we have ever experienced for fourth quarter. We view this as an extremely strong indicator of capacity needs our customers are planning in 2022 and beyond and the associated ramp up of future recurring revenues from these systems. Not only were systems sales strong in the quarter, but we also delivered record revenue from consumables and services, in what was an exceptional peak season for our customers. Services revenue came in at $11.6 million for the fourth quarter, net of noncash warrant impact of approximately $441,000, and were also 13% of total revenue. This compares to $10.9 million in the year ago quarter, which included very strong upward revenue. For the full year 2021, services revenue was $39.4 million net of the noncash warrant impact of approximately $1.5 million, and were 12% of revenue, and approximately 39% year-over-year. As we enter 2022 we are gearing up for a very busy upgrade cycle in addition to a number of innovative NPIs and have very strong backlog heading into the first and second quarters.…

Thank you, Alon. And I believe now we are ready to take questions. Operator, please open the call for Q&A session. Thank you.

Certainly. [Operator Instructions] Our first question today is coming from Rod Hall from Goldman Sachs. Your line is now live.

Yes, good morning. Thanks for the question. I guess I wanted to kick off given we're in reopening Ronen and you have so much insight into the fashion industry, I wonder if you could talk a little bit about how you see reopening affecting demand, both for the kind of digital fashion that you guys are behind and your products? And then I have a follow up.

Yes, thank you, Rod. So we see major trends in the market, both from brands, designers, creators, many, many other companies that would like to go digital and would like to connect into, from the digital to the physical. Kornit is playing a major role in connecting the digital to the physical. We see a major demand going into the e-commerce, into the different platform of the marketplaces and the growth what we have seen in Q4, we see a peak season from our customers. It was one of the strongest peak seasons ever. Our customer grew about 30% and we saw demand around the clock. This is coming mainly from the digital world that would like to connect into the physical world. Kornit is a unique position and our customers unique position to enable this connectivity both from the virtual to physical and this is where we see the growth is coming also moving forward into 2022.

Do you -- I guess what I was getting at, do you think demand could accelerate given reopening? People haven't really been too much into fashion in lockdown, but now as we continue to reopen, it seems like fashion would be more of interest to people or do you think that that demand is already kind of there?

No, I think it's just the beginning. We actually -- what we are enabling is the unleashing the creativity for any creators. Until now the supply chain was the limitation of being able to create, so brands were producing -- were designing the products and producing it overseas and shipping it and taking 18 months until the product is coming to the shelf. In today's world, in the digital world, what Kornit is enabling is actually any creators, any designers to take their design, post it wherever they want, if they want to post it in Shopify, in Instagram, and enable them to sell it on the KornitX platform and connect it to the GSA network of our fulfiller for customers that are using Kornit technologies.

You know, if I can add, we see we see much, much bigger exposure from Kornit to the fashion world and this is part of our plan to open to these worlds with the fashion events that we are running and we plan to continue with this because we see the traction. We see the interest that is coming from not only the traditional customers of Kornit, but the ones who are running the fashion world. And this is, it gives us a lot of confidence that it is in the right direction.

Okay, and then I had just a follow up on question with all the price increases, I know you've been putting some through. I wondered how customers are reacting to the price increases, and then what you're thinking in terms of increases as we move through this year? Thanks.

Yes, so first of all, price increase is the last resort. This is not something that we would like to do. We're actually putting a lot of focus on cost reduction as much as we can, but there are areas that we have no choice. I'll give you an example, logistics. Logistics cost is going up dramatically and we have to share it with our customers. So we are not taking the entire increase of cost and pushing it to our customers. We are sharing some of the pains. We are actually communicating very, very clearly ahead of time, at least three months ahead of time with our customers, enabling to order ahead of time if they would like to order new systems or new or additional ink, and we share the minimum possible with our customers. We have already done it last year and we are planning to do it this year. Overall, customers understand the market dynamics and are accepting it in a positive way.

Okay, great. Thanks, Ronen. Thank you, Alon.

Thank you.

Thank you. Our next question today is coming from Patrick Ho from Stifel. Your line is now live.

Thank you very much and congrats on a nice year. Ronen, maybe first off, in terms of the supply chain, it sounds like you guys managed through that very well. Can you give any color on, maybe some of the challenges and the headwinds that you experienced during the quarter and how you look at the current environment from that angle?

So, I think that we are facing the same issues that any other company is facing. First of all, logistics. So, logistics, first of all, the cost is going up, it is not predictable. Many shipments that we were supposed to get are being delayed, which carries components and materials for different products that we are trying to build and to sell. But overall, as we have a great visibility scope to our business, we manage to share the visibility and place order ahead of time with our suppliers, with our contact manufactures, with secured space with our contract manufactures to produce ahead of time. We leverage our balance sheet to place order ahead of time and increase inventory in areas that we felt that we have to secure and you can see it on our balance sheet as well, and we feel right now secured for 2022 and even entering into 2023. On top of that, I believe that we have the best operational team in the world, working around the clock. Every morning we have new surprises of things that are being delayed from our suppliers and our team here is fully committed to find solutions. Until now, we managed to deliver fully to the SLA. We are committed to our customers.

Great, that’s helpful. And as my follow up question, your recent acquisition of Tesoma, how are you going to manage their product base with yours? Is it something that you could still sell on a standalone basis to customers or is it going to be kind of integrated with your current system portfolio as kind of like an add-on or kind of complimentary solution?

So, as you know, the acquisition we'll complete it in the beginning of April, April 1, this is the aim, so we just signed it. Right now we are entering into the PMI process, so there will be a transition period. Tesoma has the products that they are selling, not all of them to the textile market. Gradually we will change the focus of Tesoma with technology into the textile market. There will be products that we’re going to integrate fully to our solution that will be fully connected in line to our solutions. There will be smart technologies that we are taking there from Tesoma. It will be more sustainable, better total cost of ownership and much better productivity. So, we are excited about this acquisition. There's very strong capable engineering and technology team there. We are eventually going to integrate them into Kornit, but we are taking it one step at a time. We have a very clear target for end of this year to bring to the market the new solution based on the integration of Kornit and Tesoma. Those would be smart solutions, some of them will connect in line to our solutions, some of them will be near line to our solution.

I just want to highlight what Ronen started with. We signed the agreement. We haven't closed the deal yet. So we are in discussions and working on the plan to be as ready as possible for PMI post closing, and then we'll take it from there to execution.

Great, thank you very much.

Thank you.

Thank you. Our next question today is coming from Jim Suva from Citigroup. Your line is now live.

Thank you. Can you let us know kind of a little bit about what's normal or expected for the cadence of kind of your automation of these integration of acquisitions you're doing? Like, is there like an alpha phase and a beta phase and then a couple of quarters it starts to roll out more broadly, is that the way to think about it or are we already at some of those phases now and what time line should we be thinking about? Thank you.

Thank you for the question. So as you know, last year, we shared our strategy, 4.0 strategy, which is based on three pillars. The base pillar is really about the operations side, the production flow with the aim to automate and to digitize the entire production flow. Until now, we are focusing very much on the printing engine, but there are other parts from the ERP, to picking of the garments, to printing, to drying, to folding, to shipping. All of this, the aim is to automate to digitize. By the end, we see it as a dark room with no operators and then we are taking it and one step at the time. For example, this year, we announced that we are coming with automation into the Atlas family, Atlas MAX and the Atlas, which will enable much faster automation, much faster loading and unloading on the Atlas MAX with much better predictability and consistency. You will see later this year, we are going to unveil our next-generation platform for the DTG. I already mentioned it in previous call. We are going to unveil it here in Israel in an event in the beginning of April. This system is taking the automation to a totally different level, both from the loading and unloading, but also from the drying perspective and the overall smart capabilities of the entire solution. So we are looking at the entire solution on the floor, and the aim is fully to automate it.

Great. And then my follow-up question is, I believe you recently announced an expansion or new center for ink in Israel, if my memory is correct, I could be off on that. Is that new announcement or was that due to you had constraints at your other facility or is this more going to reduce lead times and shipment costs and delivery times to your customers or how should we think about that?

No. This was a project that we're already working for the last three years. Of course, we announced about it because it included a massive CapEx investment. It was -- it's now ready. It was -- it's a very, very successful project. It's actually we decided to go for it when we looked at our long-term strategy of becoming $1 billion in 2026 and even going beyond that. So we understood that we need more capacity to produce ink and the current ink plant would not be sufficient for 2026. The situation right now is that we actually moved already to the new ink plant. We started to manufacture. The quality is fantastic. We are going to see some benefit, not only in terms of quality and automation, but also in terms of sustainability, and longer term, we'll see improvement in the cost of producing those inks.

Thank you so much for the details. It's greatly appreciated.

Thank you. Our next question is coming from Brian Drab from William Blair. Your line is now live.

Hi, thanks for taking my questions. I was wondering if I could just start with the upgrades. And can you give us a sense for what percentage of those upgrades do you think you can complete in 2022, the percentage of the total that you expect to do ultimately? And are the margins -- can you make any comment on how the margins would be on those upgrades relative to your corporate average?

Yes, good question. I will try to give you some color. I will not be able to provide you exact numbers. So we have three main new upgrades doing -- starting 2022. One of them is the Atlas from the Atlas to the Atlas MAX. As we mentioned, we expect about 75% of our installed base to go through this update, some of them in 2022 and some of them in 2023. We expect to end this upgrade by the end of 2023. The second upgrade is about automation. Automation first of all, we are aiming it for those customers that are buying now Atlas MAX and we'll be able to add automation starting end of Q2 and later on also customers that have Atlas will be able to add automation on top of the Atlas. This will impact positively mainly H2 of the year and following, of course, 2023. The third upgrade is about Presto MAX. So customers that are using the Presto will be able to upgrade to the 1st of March during H2 of this year, which will provide them a huge benefit. As for the Presto MAX, we expect all our installed base to upgrade to the Presto MAX. For the automation, we expect 50% of our installed base and for the Atlas MAX 75%. And in terms of time frame, we didn't share exactly how many we expect in 2022 and how many in 2023, but it's going to be along those years.

Ronen is the automation upgrade coming you said at the end of the second quarter. I think originally, you were planning to have that in the first quarter. Is there anything to comment on there?

You are right. In terms of the Atlas MAX, we started already the upgrades from Atlas to Atlas MAX. The automation, we decided to delay it a bit into Q2, end of Q2, some of it because we wanted to focus first of all on the Atlas MAX before we are going to the installed base of the Atlas. We had a bit to wait for the maturity of the Atlas MAX to implement the solution, and we are starting now beta testing of this solution. We'll be ready to go to the market by end of Q2.

Okay, thanks. And then can you say anything about how the margins are going to be on these upgrades relative to the average?

The margins are very similar to the average margins that we have on other products.

Okay. And then I'll just try to ask one more. Can you give us any sense for, I know you're going to show -- announce this machine with more details on the DTG side, the high-volume machine later this year, but can you give us any sense for what sort of unit volumes become economical, potentially on this machine compared with today?

Great question, and we will be able to share much more information in April, but the aim of this technology and the DTG is really going after the mass market. So while the Atlas and the entire portfolio that we have on the DTG is mainly going to the on-demand for the customization and one-off and very, very short runs. This solution systems is aiming for much longer run, aiming to go after screen replacement and after the traditional market that used to run on screen for brands and fashion industry.

Okay, thanks very much. I’ll pass it on.

So just to add on that, it's a totally additional market. It's really incremental market was untapped until now. We could -- we didn't play there and for us, it's a huge potential moving forward. Again, this product we are going to unveil in April is going to be ready for the market mid of 2023.

Got it. Thank you very much.

Thank you. Our next question today is coming from Tavy Rosner from Barclays. Your line is now live.

Hi, thanks for taking my questions. I wanted to talk about KornitX a little bit. You mentioned the opportunities on the road and I was wondering if you can comment on the different stages of the ramp-up coming from there? Is it to increase kind of the number of machines that are connected, is to invest more to the front end or the backend software? How should we think of the rest -- next in the quarters?

Tavy, can you repeat the question? I couldn't hear you clear enough. Tavy, can you repeat please the question?

I changed my headset. Is it better now?

Yes, we can hear you clear now.

Okay, sorry for that. Yes, I wanted to ask about KornitX. You mentioned the opportunity and obviously, you have the long-term guidance. But I wanted to see about the next stages of the ramp-up from here, is it to increase kind of the number of machines that are connected to the system or is it to kind of invest in software, or how should we think of the roadmap from here for the next coming quarters?

Yes, so thanks for the question. So KornitX is a massive, massive opportunity for Kornit and for the industry. And we are working right now, we are very much focused on three pillars on the KornitX. One is global fulfillment network, working with our customers to define who is going to be a fulfiller for KornitX in all territories around the world. So not everyone will be part of this network. You have to meet defined criteria in terms of quality, capacities, SLA, pricing and other stuff. So we are working very, very closely with defined fulfiller to meet the SLA on this pillar. The other pillar is really the platform itself. The KornitX platform, which we're always adding more capability and now we are coming with new UI and UX much more improved. There's a lot of capability in terms of designs and the ease of use of the system. So this is another focus area for the team. And the third focus area is really about the demand generation. And there, we are looking on some really, really big deals. I hope that we will be able to announce very, very soon on some very, very big deals connecting mega platform into KornitX, very similar to the Canva deal, but with even much bigger platform, driving the entire volumes through KornitX. So we see many segments, interesting segments that can connect to KornitX, if it's in the fashion industry, if it's in the gaming industry, if it's in the corporate world. We are working on a few very interesting projects in teams, sports teams, connecting into fans and through KornitX, so the potential there is massive. The entire world is moving into the digital space and Kornit is the platform to connect the digital into the virtual, into our customer base that's using the Kornit systems and enabling their own demand manufacturing anywhere around the world in a sustainable way.

Great, thanks for that. And last one from me, if I may. I mean you guys mentioned the significant net cash position that you have on the book. And historically, you mentioned some of the proceeds from the insurance going into acquisitions. And I guess, I was wondering how we should think of acquisition going forward? Should we think of kind of a lot of smaller ones that you guys have made, like complementary technology or perhaps down the road you'll be thinking of kind of a large one on the software side?

So we are looking at -- on the three pillars, both on the production flow, digitizing the production flow both on the KornitX. There's a lot of solution around it that came complementary, the KornitX solution on data, managing data on AI, so it's really interesting. The other pillar is more in the digital world. We're looking into areas of playing more on the high value stream and capturing demand out there. In terms of the size of the deals, there's a big range. We are looking for some small companies, but we are looking also for some more sizable M&A potential in front of us.

Great, thanks for that. I appreciate it.

Thank you.

Thank you.

Thank you. Our next question today is coming from Greg Palm from Craig-Hallum. Your line is now live.

Yes, congrats on the results here. Thanks for taking the questions. I guess just as a follow-up to Q4, EMEA really stood out, and you gave us a little bit of color, but maybe we can dig into that a little bit more. I'm assuming that was sort of the big part of the upside relative to maybe your own expectations?

The upside versus the expectations, it came both from EMEA, both from Asia. Asia had a great quarter as well and Asia is entering into 2022 really with massive momentum and nice thing to see in Asia is also that they we start to see business also in the DTF, not only the DTG. But also from our global strategic accounts, so you should assume that some of the kind of surprise on the apps, on the numbers, not only coming from systems, but coming from the recurring, it was a peak season to the recurring ahead of what we expected. Our customers printed more than we expected and generated more revenue out of the ink, which is great because also it's in better gross margin.

If I refer to the different revenues, Ronen mentioned the very strong peak season with very nice consumables revenues, but in addition to that, we had very strong system sales in Q4. So the regular seasonality tends more to the consumables in Q4. In this quarter, we enjoyed both, consumables and strong system sales.

Okay, that's helpful. And I mean, I guess, as we look back on the last year, clearly, a huge year for systems growth and you mentioned that even Q4 was a lot better than normal seasonality. So I'm curious, as you're talking to customers, is the reason that they're accelerating their own investments changing at all? I don't know if that's just more a replacement of screen, maybe it's got to do with supply chains. I don't know, maybe a bigger focus on sustainability. What are you seeing out there?

Is a different play between the DTG to DTF. The DTG, the main demand is coming from, actually from the digital world. Most of our customers are into the B2C or B2B2C business connecting through all kinds of e-commerce and marketplaces. The demand is coming from there. As I mentioned, into the future with the new system that we are bringing into DTG, we will start playing more in the traditional market, replacing screen printing in more longer run. In the DTF is a different play. DTF, first of all, is a play of sustainability. As you know, DTF, the traditional way of producing own fabric is massive polluting, consume a lot of water, there's a lot of regulation right now in different countries that we cannot use it anymore and have to switch to pigment. And we have, by far, the best pigment fully sustainable. So this is a major driver into our technology. Another driver that we will start to see, we start to see fashion and not only printing on garment, printing on roll of fabric to create fashion wear or fashionable home moving online as well. And customization is coming to the fashion world and consumers can order different designs. And this market is moving also to on-demand production versus producing into inventory and trying to push it to the market. So those are the two main drivers on the DTS, and we're enjoying a massive growth. We are entering Q1 with really strong backlog of order into the DTF, and we are adding more capacity and gearing up in terms of headcount on the DTF on the ground to go after these markets.

From a customer perspective, we see the larger customers continue to expand either in new sites or in new territories. We see it very clearly. And we see many new customers joining to this play. So we have a very nice ratio also of new customers, which can give you an indication on where the volume goes.

Yes, understood, and it sounds like a lot to look forward to in 2022. I’ll leave it there. Thanks.

I would just add one more on is that the platform of the Kornit Fashion Week is really driving the awareness that was missing in the market for designers, that they really can unleash the activities. They can design anything they want and get it the same day. They don't need to wait six months or 18 months to get that product. They don't need to order hundreds of meters, they can order, they can design a dress and print one dress and produce it and ship it the same day. This is a revolutionary concept the platform of Kornit Fashion Week that we've done in LA and this year, we are going to do it in London and in Israel again is really driving this message to the entire market, and we feel the change. We feel the change due to this marketing activity.

Thank you.

Thank you. Your next question is coming from Jim Ricchiuti with Needham & Company. Your line is now live.

Hi, you talked about the strength in Europe and Ronen, I'm not sure if I heard you correctly, but I thought I heard something about a major Tier 1 brand in Europe. And I wonder if you could elaborate on that, is this a new customer, existing customer, can you talk to that?

So we didn't mention the name, so I cannot mention the name, but we are dealing with some major, major brands in Europe. Some of them we mentioned in the past, like the SOs and the Boohoo of the world, that I can tell you, those are Tier 1, few Tier 1 brands that we are dealing in Europe right now and potentially can lead to massive growth, both on KornitX and systems and ink. What we mentioned is few customers fulfillers that purchased multiple units, one of the more than double-digit number of units, is HST71 based in Poland, and they are growing very, very fast. Already have a few of our systems and now that's scaling faster business, but also Snuggle in the U.K. We can see Printful expanding both in the U.S. and Europe, across Europe, in U.K., in Barcelona, in Poland and many other places. So this is another example of massive expansion of one of our customers.

And I have a question for you, Alon. Just you gave a little color on G&A, I'm wondering on the R&D side, is there going to be anything unusual in terms of the cadence of the R&D spend over the course of 2022, just given the work you're doing towards developing the new DTG system?

So, nothing unusual in terms of the expenses, a lot of unusual things in terms of innovation. So we have continued to invest in R&D heavily. And this is for the great NPI coming this year and the investments in KornitX and other new applications. And as you can see, we grow the R&D expenses in a responsible way and it continues to grow from quarter-to-quarter, but in a controlled way, and there is no something special that will happen in the future.

Got it, thanks a lot.

Thanks a lot.

Thank you. Our next question is coming from Jared Maymon from Berenberg Capital. Your line is now live.

Hey, good morning guys. So, first question from me, so I think one of the key benefits of the MAX technologies is obviously, XDi, which adds in the heat transfer vinyl, et cetera. And Ronen, I think you mentioned, I think the number was 75% of Atlas installed base, you're expecting to upgrade to the Atlas MAX. So I'm just wondering, I mean, if I think about it, if I own 100 Atlas systems, and 10% of my jobs require XDi, then why would I go and upgrade 75% of my systems. So I guess the question is kind of our -- are a lot of these customers that are upgrading it, are they doing it for kind of XDi and some of the additional capabilities? Or is it more about productivity and the kind of in system changes?

Yes, thanks for the question. So of course, it's not only because of the XDi. So there's a massive benefit to the MAX technology. First of all, is the quality. The print quality is in a different league. When I'm saying print quality is not only the way it looks, but it's also the durability of the print, the ability to print on much wider media range, so many, many different types of media that you couldn't print before, using the Atlas, now you can do it with the Atlas Smart. So on the king quality is a massive change, a massive jump and is meeting all the highest quality sensitive brands quality standard. The second is productivity. Actually by implementing Kornit -- by implementing the MAX technology, you've increased the productivity of the Atlas by more than 20%. So just by calculating the 20% productivities that you are adding, and this makes a lot of sense to upgrade and it was quite a lot for our customers to do that. And of course, the third point is new application, which is leveraging the XDi. You're absolutely right, not everyone is going to leverage the XDi, but those that will leverage the XDi, they will be able to sell much higher premium products, get much better margins on the products they are selling to the market, and we will see the adoption rates increasing also in the XDi moving forward.

Okay, great. That's really helpful. And then I guess the only other question for me. Just on KornitX, it sounds like this is already progressing pretty well. And I know you've mentioned before, you guys have a pretty sizable backlog of customers that are trying to apply this offering and kind of get in on it. So I'm just wondering, is there any color you can kind of provide us on what KornitX might contribute in 2022, either from a top line perspective or how close the business might be to that kind of longer-term gross margin target?

Yes. So in terms of guidance, we are still not providing guidance for the KornitX as a business, overall business. I can tell you that it is already generating a few millions of dollars during 2021 and Q4 was a record quarter for KornitX. We see very, very nice growth coming into this platform. We have ambitious plan to grow the KornitX during 2022. And of course, the margins that you are going to see, on this platform moving forward is higher than the margins that we even see on the system and ink side. So it should contribute very positively on the margin side.

Okay, got it. That’s helpful. Thanks Ronen.

Thank you.

Thank you. Our final question today is coming from Chris Moore from CJS Securities. Your line is now live.

All right. Yes, thanks guys. I'll make it quick. So yes, just trying to better understand kind of the evolution of the top-10 customer mix, specifically kind of how many global consumer brands are in there now and are you expecting that to look much differently 12 to 18 months from now?

So at this stage, we are not providing color, how many brands are within the top-10, okay? The suspicious customer, you probably know, one of them is, of course, a global strategic account and is the biggest one. And we have most of the top customer fulfillers that are on this list. We expect to see a massive change or a major change moving forward in the next two to three years. You will start seeing new names coming into the top-10, some of the brands and some of them other marketplaces are going to enter into this space as well. So while the top 10 will continue to be around 60%, this is our assumption moving forward. The names will change dramatically, and you will see brands -- major Tier 1 brands part of this list.

Got it. I’ll leave it there and I appreciate it guys.

Thank you very much.

Thank you.

Thank you. Mr. Samuel, we have no further questions. I'll turn the floor back over to you for closing remarks.

So I would like to thank everyone for joining the call today. We are very, very proud about what we have achieved in 2021, and we're really looking forward for 2022, which is going to be an exciting and very, very busy year. And I'm really looking forward to share with you more in the next earnings call. It's also an opportunity to invite you again, all of you, analyst community and investors to come to the Fashion Week here in Tel Aviv in April, beginning of April, but also there's another opportunity to come to the Fashion Week who need Fashion Week London second week of May, we will be happy to host all of you to share with you our plans and to show you the new technology, which we are going to unveil here in Israel in April. So we are excited about this year, and would like to thank all of you for your trust. Last thing I would like again to thank our employees for doing an amazing job for caring about our customers being so passionate about it, working day and night and really making it happen. So thank you for our employees and by that, I wish all of you a great day and passing the call to Andy.

Great, thank you, Ronen, and thank you, Alon and Amir, and thank you all for joining us today. As always, if you should have any follow-up questions, please do not hesitate to reach out to me directly. With that, have a great day. And Kevin, could you please close the call? Thank you.

Certainly. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.