Kornit Digital Reports Fourth Quarter and Full-Year 2019 Results

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Kornit Digital Reports Fourth Quarter and Full-Year 2019 Results

Record 2019 with 39% Year-Over-Year Growth in System Sales

  • Fourth quarter revenue of $48.7 million, net of $1.1 million attributed to the non-cash impact of warrants.
  • Fourth quarter 2019 GAAP operating income of $3.3 million; Non-GAAP operating income of $5.8 million, net of $1.1 million attributed to the non-cash impact of warrants.
  • Completed a year of innovative and successful new product introductions, continued to focus on strengthening infrastructure and expanding scale across the business, laying foundation for future growth.

ROSH-HA`AYIN, Israel, Feb. 11, 2020 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (NASDAQ: KRNT), a leading provider of digital printing solutions for the global textile industry, today reported results for the fourth quarter and full-year, ended December 31, 2019.

“The fourth quarter of 2019 capped off another year of exciting growth and progress for Kornit. We are extremely proud of our strong performance in 2019 and believe that our leadership position in the market continues to widen,” said Ronen Samuel, Kornit Digital’s Chief Executive Officer. “Our 2019 results provide a robust foundation for continued growth and execution in 2020 as we are seeing the exceptionally strong momentum in the business continue in the first quarter. We believe Kornit is best positioned to lead the textile industry in its shift to on-demand manufacturing in a sustainable way.”

2019 GAAP and Non-GAAP figures in today’s press release are presented using a different valuation basis to the warrants impact compared to previous quarters as a result of the recently issued accounting standards update (ASU 2019-08).

The Company will provide additional information in today's earning call, details of which can be found at the end of today's press release.

The following table compares the adverse, non-cash impact that our outstanding warrants had on our results of operations during the fourth quarters of 2019 and 2018, respectively:

 Fourth Quarter Warrants Impact
  
 Three Months Ended
 December 31,
 2019 2018
 Net of
Warrants
Impact
 Warrants
Impact
 Net of
Warrants
Impact
 Warrants
Impact
        
Revenue$48.7M $1.1M $37.8M $1.4M
Non-GAAP Gross Margin50.2% 113bps 48.8% 181bps
Non-GAAP Operating Margin12.0% 200bps 7.8% 326bps
Non-GAAP Net Margin14.5% 194bps 7.8% 326bps
Non-GAAP Diluted Earnings Per Share$0.17
 $0.02 $0.08
 $0.04
        

The following table compares the adverse, non-cash impact that our outstanding warrants had on our results of operations during the full-year 2019 and 2018, respectively:

 Full-Year Warrants Impact
  
 Year Ended
 December 31,
 2019 2018
 Net of
Warrants
Impact
 Warrants
Impact
 Net of
Warrants
Impact
 Warrants
Impact
        
Revenue$179.9M $5.1M $142.4M $4.6M
Non-GAAP Gross Margin47.9% 144bps 49.8% 156bps
Non-GAAP Operating Margin10.1% 248bps 8.9% 284bps
Non-GAAP Net Margin10.9% 245bps 9.2% 283bps
Non-GAAP Diluted Earnings Per Share$0.49 $0.13 $0.37 $0.13
        

Guy Avidan, Kornit Digital’s Chief Financial Officer, said, “We had a strong close to 2019 as we saw significant business expansion with strategic accounts and collaborative business development activities with leading brands resulting in new customer accounts in both the athleisure and specialty retail categories. There is a significant market opportunity ahead of us and we continue to invest in the business through expansion of our go-to-market capabilities, enhancements to our global leadership team, and allocation of incremental capital to drive innovation that will propel Kornit towards our long-term goal of reaching $500 million in run-rate sales exiting 2023.”

Fourth Quarter 2019 Results of Operations

  • Total revenue for the fourth quarter 2019 revenue grew 28.8% to $48.7 million, net of $1.1 million attributed to the non-cash impact of warrants, compared to $37.8 million, net of $1.4 million attributed to the non-cash impact of warrants in the prior year period.
  • GAAP net income for the fourth quarter 2019 was $4.8 million, or $0.11 per diluted share, compared to net income of $7.0 million, or $0.19 per diluted share, for the fourth quarter 2018.
  • Non-GAAP net income for the fourth quarter 2019 was $7.1 million, or $0.17 per diluted share, net of $0.02 per diluted share attributed to the non-cash impact of warrants, compared to $3.0 million, or $0.08 per diluted share, net of $0.04 per diluted share attributed to the non-cash impact of warrants, for the fourth quarter 2018.

Full-Year 2019 Results of Operations

  • Total revenue for the full-year 2019 revenue was $179.9 million, net of $5.1 million attributed to the non-cash impact of warrants, compared to $142.4 million, net of $4.6 million attributed to the non-cash impact of warrants in the prior year period.
  • GAAP net income for the full-year 2019 was $10.2 million, or $0.26 per diluted share, compared to net income of $12.4 million, or $0.35 per diluted share, for the full-year 2018.
  • Non-GAAP net income for the full-year 2019 was $19.6 million, or $0.49 per diluted share, net of $0.13 per diluted share attributed to the non-cash impact of warrants, compared to $13.1 million, or $0.37 per diluted share, net of $0.13 per diluted share attributed to the non-cash impact of warrants, for the full-year 2018.

First Quarter 2020 Guidance

The Company will discuss the details of its guidance live during its earnings conference call, which will be available for replay via webcast at ir.kornit.com, as referenced below.

Conference Call Information

The Company will host a conference call today at 5:00 p.m. ET, or 0:00 a.m. Israel time, to discuss the results, followed by a question and answer session for the investment community. A live webcast of the call can be accessed at ir.kornit.com. To access the call, participants may dial toll-free at 1-800-289-0438 or +1-323-794-2423. The toll-free Israeli number is 1 809 212 883. The confirmation code is 1770690.

To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 or +1-412-317-6671 (international) and enter confirmation code 1770690. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, February 11, 2020, and will last through 11:59 p.m. ET on Tuesday, February 25, 2020. The call will also be available for replay via the webcast link on Kornit’s Investor Relations website.

Forward Looking Statements

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other U.S. securities laws. Forward-looking statements are characterized by the use of forward-looking terminology such as "will," "expects," "anticipates," "continue," "believes," "should," "intended," "guidance," "preliminary," "future," "planned," or other words. These forward-looking statements include, but are not limited to, statements relating to the Company's objectives, plans and strategies, statements of preliminary or projected results of operations or of 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 not guarantees of future performance and are subject to risks and uncertainties. The Company has based these forward-looking statements on assumptions and assessments made by its management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things: the degree of our success in developing, introducing and selling new or improved products and product enhancements including specifically our Poly Pro and Presto products the extent of our ability to consummate sales to large accounts with multi-system delivery plans, the degree of our ability to fill orders for our systems, the extent of our ability to continue to increase sales of our systems, ink and consumables, the extent of our ability to leverage our global infrastructure build-out, the development of the market for digital textile printing, the availability of alternative ink, competition, sales concentration, changes to our relationships with suppliers, the extent of our success in marketing, and those additional factors referred to under "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission on March 26, 2019. Any forward-looking statements in this press release are made as of the date 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.

Non-GAAP Discussion Disclosure

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude the impact of share-based compensation expenses, acquisition related expenses, offering costs, excess cost of acquired inventory, foreign exchange differences associated with ASC 842, amortization of acquired intangible assets, deferred tax impact and restructuring expenses and their tax effect. The purpose of such adjustments is to provide an indication of our performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results. These Non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Furthermore, the Non-GAAP measures are regularly used internally to understand, manage and evaluate our business and make operating decisions, and we believe that they are useful to investors as a consistent and comparable measure of the ongoing performance of our business. However, our Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Additionally, these Non-GAAP financial measures may differ materially from the Non-GAAP financial measures used by other companies.

About Kornit

Kornit Digital (NASDAQ: KRNT) develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries. Kornit delivers complete solutions, including digital printing systems, inks, consumables, software and after-sales support. Leading the digital direct-to-garment printing market with its exclusive eco-friendly NeoPigment printing process, Kornit caters directly to the changing needs of the textile printing value chain. Kornit’s technology enables innovative business models based on web-to-print, on-demand and mass customization concepts. With its immense experience in the direct-to-garment market, Kornit also offers a revolutionary approach to the roll-to-roll textile printing industry: digitally printing with a single ink set onto multiple types of fabric with no additional finishing processes. Founded in 2003, Kornit Digital is a global company, headquartered in Israel with offices in the USA, Europe and Asia Pacific, and serves customers in more than 100 countries worldwide.

 
 
KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
  December 31, December 31,
  2019 2018
  (Unaudited)  
ASSETS      
CURRENT ASSETS:      
Cash and cash equivalents $40,743 $74,132
Short-term bank deposit  95,000  5,000
Marketable securities  32,567  3,981
Trade receivables, net  40,510  21,953
Inventory  37,477  30,030
Other accounts receivable and prepaid expenses  6,985  5,660
Total current assets  253,282  140,756
       
LONG-TERM ASSETS:      
Marketable securities  95,393  44,603
Deposits and prepaid expenses  356  744
Severance pay fund  301  351
Deferred taxes  9,661  7,272
Property,plant and equipment, net  17,489  14,994
Operating lease right-of-use assets  22,806  -
Intangible assets, net  2,494  1,011
Goodwill  5,564  5,092
Total long-term assets  154,064  74,067
       
Total assets $407,346 $214,823
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Trade payables $23,449 $16,614
Employees and payroll accruals  9,165  7,932
Deferred revenues and advances from customers  2,688  3,633
Operating lease liabilities  3,902  -
Other payables and accrued expenses  8,253  4,993
Total current liabilities  47,457  33,172
       
LONG-TERM LIABILITIES:      
Accrued severance pay  1,035  1,059
Operating lease liabilities  19,231  -
Other long-term liabilities  1,320  1,456
Total long-term liabilities  21,586  2,515
       
SHAREHOLDERS' EQUITY  338,303  179,136
       
Total liabilities and shareholders' equity $407,346 $214,823
     


KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
        
 Year ended Three Months Ended
 December 31, December 31,
  2019  2018   2019  2018 
 (Unaudited)   (Unaudited)
        
Revenues       
Products$156,594 $125,729  $42,247 $33,522 
Services 23,272  16,644   6,403  4,264 
Total revenues 179,866  142,373   48,650  37,786 
        
Cost of revenues       
Products 71,057  53,303   17,746  14,029 
Services 26,733  19,201   6,870  5,630 
Total cost of revenues 97,790  72,504   24,616  19,659 
        
Gross profit 82,076  69,869   24,034  18,127 
        
Operating expenses:       
Research and development 22,407  21,912   6,021  6,231 
Selling and marketing 33,573  25,596   9,251  6,877 
General and administrative 18,498  16,436   5,454  4,179 
Restructuring expenses -  321   -  - 
Total operating 74,478  64,265   20,726  17,287 
Operating income 7,598  5,604   3,308  840 
Financial income, net 3,313  1,433   2,186  341 
Income before taxes on income 10,911  7,037   5,494  1,181 
        
Taxes on income (benefit) 744  (5,392)  738  (5,796)
Net income 10,167  12,429   4,756  6,977 
        
Basic net income per share$0.27 $0.36  $0.12 $0.20 
        
Weighted average number of shares       
used in computing basic net       
income per share 38,079,394  34,521,352   40,655,404  34,956,121 
        
        
Diluted net income per share$0.26 $0.35  $0.11 $0.19 
        
Weighted average number of shares       
used in computing diluted       
net income per share 39,500,305  35,363,704   42,210,359  35,986,581 
        


KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
          
  Year ended  Three Months Ended
  December 31,  December 31,
 ` 2019   2018    2019   2018 
  (Unaudited)   (Unaudited)
                  
GAAP cost of revenues$97,790  $72,504   $24,616  $19,659 
Cost of product recorded for share-based compensation (1) (632)  (494)   (213)  (154)
Cost of service recorded for share-based compensation (1) (520)  (398)   (146)  (130)
Intangible assets amortization on cost of product (3) (100)  (100)   (25)  (25)
Excess cost of product on acquired inventory (a) (2,790)  -    -   - 
Acquisition related expenses (2) (28)  -    -   - 
Non-GAAP cost of revenues$93,720  $71,512   $24,232  $19,350 
                  
GAAP gross profit$82,076  $69,869   $24,034  $18,127 
Gross profit adjustments 4,070   992    384   309 
Non-GAAP gross profit$86,146  $70,861   $24,418  $18,436 
                  
GAAP operating expenses$74,478  $64,265   $20,726  $17,287 
Share-based compensation (1) (5,462)  (4,654)   (1,671)  (1,378)
Acquisition related expenses (2) (291)  -    (234)  - 
Intangible assets amortization (3) (757)  (964)   (225)  (241)
Offering costs (c) -   (175)   -   (175)
Restructuring expenses -   (321)   -   - 
Non-GAAP operating expenses$67,968  $58,151   $18,596  $15,493 
                  
GAAP Financial income$3,313  $1,433   $2,186  $341 
Foreign exchange losses associated with ASC 842 250   -    (530)  - 
Non-GAAP Financial income$3,563  $1,433   $1,656  $341 
                  
GAAP Taxes on income (benefit)$744  $(5,392)  $738  $(5,796)
Tax effect on to the above non-GAAP adjustments 1,021   472    88   186 
Tax benefit (b) 388   5,941    (419)  5,941 
Non-GAAP Taxes on income$2,153  $1,021   $407  $331 
                  
GAAP net income$10,167  $12,429   $4,756  $6,977 
Share-based compensation (1) 6,614   5,546    2,030   1,662 
Acquisition related expenses (2) 319   -    234   - 
Intangible assets amortization (3) 857   1,064    250   266 
Offering costs (c) -   175    -   175 
Excess cost of product on acquired inventory (a) 2,790   -    -   - 
Restructuring expenses -   321    -   - 
Foreign exchange losses associated with ASC 842 250   -    (530)  - 
Tax effect on to the above non-GAAP adjustments (1,021)  (472)   (88)  (186)
Deferred taxes on income (benefit) (b) (388)  (5,941)   419   (5,941)
Non-GAAP net income$19,588  $13,122   $7,071  $2,953 
                  
GAAP diluted earning per share$0.26  $0.35   $0.11  $0.19 
                  
Non-GAAP diluted earning per share$0.49  $0.37   $0.17  $0.08 
                  
Weighted average number of shares                
                  
Shares used in computing GAAP diluted net earning per share 39,500,305   35,363,704    42,210,359   35,986,581 
                  
Shares used in computing Non-GAAP diluted net earning per share 39,751,470   35,626,160    42,710,001   36,154,121 
                  
(1) Share-based compensation                
 Cost of product revenues 632   494    213   154 
 Cost of service revenues 520   398    146   130 
 Research and development 1,294   1,022    360   327 
 Selling and marketing 1,689   1,240    557   398 
 General and administrative 2,479   2,392    754   653 
   6,614   5,546    2,030   1,662 
(2) Acquisition related expenses                
 Cost of product revenues 28   -    -   - 
 Selling and marketing 14   -    -   - 
 General and administrative 277   -    234   - 
   319   -    234   - 
(3) Intangible assets amortization                
 Cost of product revenues 100   100    25   25 
 Selling and marketing 757   964    225   241 
   857   1,064    250   266 
                  
(a)Consists of charges to cost of revenues for the difference between the higher carrying cost of the acquired inventory from a distributor purchased on February 8, 2019 which was recorded at fair value and the standard cost of the Company's inventory, which adversely impacts the Company's gross profit.
(b)Non cash impact related to the recognition of deferred taxes with respect to carryforward losses in Israel.
(c)Offering costs related to the secondary offering of the company's shares.
          


KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
    
  Year ended Three Months Ended
  December 31, December 31,
   2019   2018   2019   2018 
  (Unaudited) (Unaudited)
                 
Cash flows from operating activities:                
                 
Net income $10,167  $12,429  $4,756  $6,977 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  4,441   4,965   1,082   1,362 
Fair value of warrants deducted from revenues  5,094   4,576   1,130   1,386 
Share-based compensation  6,614   5,546   2,030   1,662 
Amortization of premium (discount) on marketable securities  (112)  388   7   49 
Realized loss (gain) on sale of marketable securities  (271)  480   -   480 
Decrease (increase) in trade receivables  (18,617)  1,069   4,727   8,653 
Increase in other receivables and prepaid expenses  (1,204)  (3,135)  (1,609)  (1,026)
Decrease (increase) in inventory  (4,183)  4,037   (3,076)  (4,882)
Decrease in operating leases right-of-use assets  (571)  -   (623)  - 
Increase in deferred taxes, net  (1,885)  (6,665)  (1,253)  (6,640)
Decrease (increase) in other long term assets  386   (121)  182   (33)
Increase in trade payables  6,032   4,394   5,585   4,627 
Increase in operating lease liabilities  898   -   118   - 
Increase in employees and payroll accruals  1,423   1,621   239   1,100 
Increase (decrease) in deferred revenues and advances from customers  (921)  1,981   202   1,692 
Increase (decrease) in other payables and accrued expenses  3,588   548   1,934   (243)
Increase (decrease) in accrued severance pay, net  26   (1)  (20)  (199)
Increase (decrease) in other long term liabilities  (136)  867   (13)  712 
Loss from sale and disposal of property and Equipment  23   -   22   - 
Foreign currency translation income on inter company balances with foreign subsidiaries  212   389   (472)  49 
                 
Net cash provided by operating activities  11,004   33,368   14,948   15,726 
                 
Cash flows from investing activities:                
                 
Purchase of property and equipment  (5,416)  (7,294)  (1,351)  (2,388)
Acquisition of intangible assets and capitalization of software development costs  (1,337)  -   (538)  - 
Proceeds from sale of property and equipment  3   -   -   - 
Cash paid in connection with acquisition  (4,715)  -   -   - 
Decrease (increase) in bank deposits  (90,000)  (500)  (1,000)  4,500 
Proceeds from sale of marketable securities  34,497   40,635   3,052   40,635 
Proceeds from maturity of marketable securities  3,000   6,564   1,500   3,210 
Purchase of marketable securities  (115,529)  (22,723)  (70,930)  (6,043)
                 
Net cash provided by (used in) investing activities  (179,497)  16,682   (69,267)  39,914 
                 
                 
Cash flows from financing activities:                
                 
Proceeds from secondary offering, net  129,710   -   -   - 
Exercise of employee stock options  5,901   6,425   501   4,428 
Payments related to shares withheld for taxes  (177)  -   (177)  - 
Payment of contingent consideration  (303)  (900)  -   - 
                 
Net cash provided by financing activities  135,131   5,525   324   4,428 
                 
                 
                 
Foreign currency translation adjustments on cash and cash equivalents  (27)  (72)  68   (35)
Increase (decrease) in cash and cash equivalents  (33,389)  55,503   (53,927)  60,033 
Cash and cash equivalents at the beginning of the period  74,132   18,629   94,670   14,099 
Cash and cash equivalents at the end of the period  40,743   74,132   40,743   74,132 
                 
                 
                 
Non-cash investing and financing activities:                
                 
Purchase of property and equipment on credit  920   222   920   222 
Inventory transferred to be used as property and equipment  -   591   -   192 
Lease liabilities arising from obtaining right-of-use assets  9,640   -   8,307   - 
Capitalization of software development costs  112   -   112   - 
                 
                 

Investor Contact:
Kelsey Turcotte
The Blueshirt Group
(917) 842-0334
Kelsey@blueshirtgroup.com