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    Kornit Digital Reports Fourth Quarter and Full-Year 2020 Results

    February 16, 2021

    Record Quarter with 49% Year-Over-Year Growth and Accelerating Momentum

    Record $34.3 million net cash from operations

    • Fourth quarter revenue grew 49% year-over-year to $72.3 million, net of non-cash warrants impact of $1.8 million
    • Fourth quarter GAAP operating profit of $9.0 million; Non-GAAP operating profit of $11.8 million, net of $1.8 million attributed to the non-cash impact of warrants
    • Revenue growth, profitability and cash from operations significantly exceed expectations
    • Record growth in recurring consumables business, and services outperformance
    • Entering 2021 with strong backlog and visibility

    ROSH-HA'AYIN, Israel, Feb. 16, 2021 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (NASDAQ: KRNT) today reported results for the fourth quarter and full-year ended December 31, 2020.

    “We delivered record fourth quarter results, exceeding our expectations on revenue growth, profitability, and net cash from operations, capping off a transformative year for Kornit,” said Ronen Samuel, Kornit Digital’s Chief Executive Officer. “2020 is the year in which the textile industry hit an inflection point. The massive leap in e-commerce and the exposed inefficiency of the traditional textile supply chain is accelerating the digital transformation that Kornit is leading. We see new and existing customers significantly expanding production capacity globally, and our recurring consumables business is growing strongly.”

    Mr. Samuel continued: “We started 2021 more confident than ever, with accelerating industry tailwinds, an impressive backlog of global expansion projects with strategic accounts that we are in the process of fulfilling, and an extremely robust pipeline. 2021 will be an exciting year for Kornit, filled with strategic initiatives including the launch of new powerful products, introduction of a ground-breaking proprietary 3D textile application that will bring to the market unique embroidery, high-density printing, and vinyl heat transfer effects and significantly expand our addressable market, activity with the world’s largest brands, expansion of our software business line and entry into new market verticals. In 2018 we laid out our management goal to become a $500 million revenue run rate business at the end of 2023, and we are more confident than ever in our ability to achieve this goal ahead of plan.”

    The following table compares the adverse, non-cash impact that our outstanding warrants had on our results of operations during the fourth quarters of 2020 and 2019, respectively:

    Fourth Quarter Warrants Impact

     Three Months Ended
     December 31,
     2020 2019
     Net of
    Warrants
    Impact
     Warrants
    Impact
     Net of
    Warrants
    Impact
     Warrants
    Impact
            
    Revenue$72.3M $1.8M $48.7M $1.1M
    Non-GAAP Gross Margin51.8% 117bps 50.2% 113bps
    Non-GAAP Operating Margin16.3% 203bps 12.0% 200bps
    Non-GAAP Net Margin16.0% 204bps 14.5% 194bps
    Non-GAAP Diluted Earnings Per Share$0.24 $0.04 $0.17 $0.02


    The following table compares the adverse, non-cash impact that our outstanding warrants had on our results of operations during the full-years 2020 and 2019, respectively:

    Full-Year Warrants Impact

     Year Ended
     December 31,
      2020
      2019
     Net of
    Warrants
    Impact
     Warrants
    Impact
     Net of
    Warrants
    Impact
     Warrants
    Impact
            
    Revenue$193.3M $5.4M $179.9M $5.1M
    Non-GAAP Gross Margin46.7% 144bps 47.9% 144bps
    Non-GAAP Operating Margin2.7% 263bps 10.1% 248bps
    Non-GAAP Net Margin4.7% 257bps 10.9% 245bps
    Non-GAAP Diluted Earnings Per Share$0.21 $0.12 $0.49 $0.13


    “We are very pleased with our results for the fourth quarter delivering accelerating top-line growth and strong profitability, driven by a robust peak season and strength in our recurring consumables business,” said Alon Rozner, Kornit Digital’s Chief Financial Officer. “As we enter 2021, we have strong visibility and we are very excited by demand from global customers relying on Kornit to achieve their goals. Our significant order backlog and solid pipeline position us well to drive sizable growth and profitability in 2021 and beyond.”

    Fourth Quarter 2020 Results of Operations

    • Total revenue for the fourth quarter of 2020 was $72.3 million, net of $1.8 million attributed to the non-cash impact of warrants, compared to $48.7 million, net of $1.1 million attributed to the non-cash impact of warrants in the prior year period.
    • GAAP net income for the fourth quarter of 2020 was $5.9 million, or $0.12 per diluted share, compared to net income of $4.8 million, or $0.11 per diluted share, for the fourth quarter of 2019.
    • Non-GAAP net income for the fourth quarter of 2020 was $11.5 million, or $0.24 per diluted share, including $0.04 per diluted share attributed to the non-cash impact of warrants, compared to non-GAAP net income of $7.1 million, or $0.17 per diluted share, net of $0.02 per diluted share attributed to the non-cash impact of warrants, for the fourth quarter of 2019.

    Full-Year 2020 Results of Operations

    • Total revenue for the full-year 2020 revenue was $193.3 million, net of $5.4 million attributed to the non-cash impact of warrants, compared to $179.9 million, net of $5.1 million attributed to the non-cash impact of warrants in the prior year period.
    • GAAP net loss for the full-year 2020 was $4.8 million, or $0.11 per diluted share, compared to net income of $10.2 million, or $0.26 per diluted share, for the full-year 2019.
    • Non-GAAP net income for the full-year 2020 was $9.0 million, or $0.21 per diluted share, net of $0.12 per diluted share attributed to the non-cash impact of warrants, compared to $19.6 million, or $0.49 per diluted share, net of $0.13 per diluted share attributed to the non-cash impact of warrants, for the full-year 2019.

    First Quarter 2021 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.

    Fourth Quarter Earnings Conference Call Information

    The Company will host a conference call today at 5:00 p.m. ET, or 12:00 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 1-877-407-0792 or +1-201-689-8263. The toll-free Israeli number is 1 809 406 247. The confirmation code is 13715009.

    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 13715009. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, February 16, 2021, until 11:59 p.m. ET on Tuesday, March 2, 2021. 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 duration of the global COVID-19 pandemic, which, if extending for further significant periods of time, may impact once again, in a material adverse manner, our operations, financial position and cash flows, and those of our customers and suppliers; 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 Item 3.D of the Company's Annual Report on Form 20-F for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission, or SEC, on March 23, 2020, as supplemented from time to time, including in the prospectus supplement filed by the Company with the SEC pursuant to Rule 424(b)(5) under the Securities Act of 1933 on September 17, 2020. on March 23, 2020. Any forward-looking statements in this press release are made as of the date hereof, 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, excess cost of acquired inventory, foreign exchange differences associated with ASC 842, amortization of acquired intangible assets, deferred tax impact and the one-time impact of COVID-19, and the tax effect of the foregoing. 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 Ltd. (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 2002, 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,
      2020  2019
     (Unaudited)  
    ASSETS   
    CURRENT ASSETS:   
    Cash and cash equivalents$125,777  $40,743 
    Short-term bank deposit 224,804   95,000 
    Marketable securities 13,718   32,567 
    Trade receivables, net 51,566   40,510 
    Inventory 52,487   37,477 
    Other accounts receivable and prepaid expenses 9,178   6,985 
    Total current assets 477,530   253,282 
        
    LONG-TERM ASSETS:   
    Marketable securities 71,636   95,393 
    Deposits and prepaid expenses 395   356 
    Severance pay fund 337   301 
    Deferred taxes 5,096   7,781 
    Property, plant and equipment, net 29,255   17,489 
    Operating lease right-of-use assets 21,053   22,806 
    Intangible assets, net 7,221   2,494 
    Goodwill 16,466   5,564 
    Total long-term assets 151,459   152,184 
        
    Total assets$628,989  $405,466 
        
    LIABILITIES AND SHAREHOLDERS' EQUITY   
    CURRENT LIABILITIES:   
    Trade payables$32,016  $23,449 
    Employees and payroll accruals 15,022   9,165 
    Deferred revenues and advances from customers 27,019   2,688 
    Operating lease liabilities 3,957   3,902 
    Other payables and accrued expenses 11,613   6,373 
    Total current liabilities 89,627   45,577 
        
    LONG-TERM LIABILITIES:   
    Accrued severance pay 1,214   1,035 
    Operating lease liabilities 18,688   19,231 
    Other long-term liabilities 443   1,320 
    Total long-term liabilities 20,345   21,586 
        
    SHAREHOLDERS' EQUITY 519,017   338,303 
        
    Total liabilities and shareholders' equity$628,989  $405,466 


    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,
     2020 2019
     2020 2019
            
     (Unaudited)   (Unaudited)
            
    Revenues       
    Products$164,918  $156,594  $61,382  $42,247 
    Services 28,413   23,272   10,909   6,403 
    Total revenues 193,331   179,866   72,291   48,650 
            
    Cost of revenues       
    Products 75,040   71,057   24,923   17,746 
    Services 30,490   26,733   10,424   6,870 
    Total cost of revenues 105,530   97,790   35,347   24,616 
            
    Gross profit 87,801   82,076   36,944   24,034 
            
    Operating expenses:       
    Research and development 31,464   22,407   9,251   6,021 
    Selling and marketing 36,405   33,573   11,030   9,251 
    General and administrative 26,661   18,498   7,704   5,454 
    Total operating expenses 94,530   74,478   27,985   20,726 
    Operating income (loss) (6,729)  7,598   8,959   3,308 
    Financial income (expenses), net 3,498   3,313   (929)  2,186 
    Income (loss) before taxes on income (3,231)  10,911   8,030   5,494 
            
    Taxes on income (Tax benefit) 1,552   744   2,129   738 
    Net income (loss) (4,783)  10,167   5,901   4,756 
            
    Basic earnings (losses) per share$(0.11) $0.27  $0.13  $0.12 
            
    Weighted average number of shares       
    used in computing basic earnings (losses)       
    per share 42,286,275   38,079,394   45,941,153   40,655,404 
            
            
    Diluted earnings (losses) per share$(0.11) $0.26  $0.12  $0.11 
            
    Weighted average number of shares       
    used in computing diluted earnings (losses)      
    per share 42,286,275   39,294,115   47,226,835   42,210,359 


    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,
      2020 2019 2020 2019
             
      (Unaudited) (Unaudited)
             
    GAAP cost of revenues$105,530  $97,790  $35,347  $24,616 
    Cost of product recorded for share-based compensation (1) (1,056)  (632)  (284)  (213)
    Cost of service recorded for share-based compensation (1) (771)  (520)  (203)  (146)
    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)  -   - 
    COVID-19 one time impact (4) (520)  -   -   - 
    Non-GAAP cost of revenues$103,083  $93,720  $34,835  $24,232 
             
    GAAP gross profit$87,801  $82,076  $36,944  $24,034 
    Gross profit adjustments 2,447   4,070   512   384 
    Non-GAAP gross profit$90,248  $86,146  $37,456  $24,418 
             
    GAAP operating expenses$94,530  $74,478  $27,985  $20,726 
    Share-based compensation (1) (8,209)  (5,462)  (2,239)  (1,671)
    Acquisition related expenses (2) (648)  (291)  -   (234)
    Intangible assets amortization (3) (712)  (757)  (90)  (225)
    COVID-19 one time impact (4) 69   -   -   - 
    Non-GAAP operating expenses$85,030  $67,968  $25,656  $18,596 
             
    GAAP Financial income (loss)$3,498  $3,313  $(929) $2,186 
    Foreign exchange losses associated with ASC 842 1,320   250   1,292   (530)
    Non-GAAP Financial income$4,818  $3,563  $363  $1,656 
             
    GAAP Taxes on income (Tax benefit)$1,552  $744  $2,129  $738 
    Tax effect on to the above non-GAAP adjustments 706   1,021   360   88 
    Taxes on income (Tax benefit) (b) (1,259)  388   (1,869)  (419)
    Non-GAAP Taxes on income (Tax benefit)$999  $2,153  $620  $407 
             
    GAAP net income (loss)$(4,783) $10,167  $5,901  $4,756 
    Share-based compensation (1) 10,036   6,614   2,726   2,030 
    Acquisition related expenses (2) 648   319   -   234 
    Intangible assets amortization (3) 812   857   115   250 
    COVID-19 one time impact (4) 451   -   -   - 
    Excess cost of product on acquired inventory (a) -   2,790   -   - 
    Foreign exchange losses associated with ASC 842 1,320   250   1,292   (530)
    Tax effect on to the above non-GAAP adjustments (706)  (1,021)  (360)  (88)
    Deferred taxes on income (Tax benefit) (b) 1,259   (388)  1,869   419 
    Non-GAAP net income (loss)$9,037  $19,588  $11,543  $7,071 
             
    GAAP diluted earnings (losses) per share$(0.11) $0.26  $0.12  $0.11 
             
    Non-GAAP diluted earnings (losses) per share$0.21  $0.49  $0.24  $0.17 
             
    Weighted average number of shares       
             
    Shares used in computing GAAP diluted net earnings (losses) per share 42,286,275   39,294,115   47,226,835   42,210,359 
             
    Shares used in computing Non-GAAP diluted net earnings (losses) per share 43,712,110   39,751,470   47,556,867   42,710,001 
             
    (1) Share-based compensation       
     Cost of product revenues 1,056   632   284   213 
     Cost of service revenues 771   520   203   146 
     Research and development 1,712   1,294   469   360 
     Selling and marketing 2,893   1,689   743   557 
     General and administrative 3,604   2,479   1,027   754 
       10,036   6,614   2,726   2,030 
    (2) Acquisition related expenses       
     Cost of product revenues -   28   -   - 
     Selling and marketing -   14   -   - 
     General and administrative 648   277   -   234 
       648   319   -   234 
    (3) Intangible assets amortization       
     Cost of product revenues 100   100   25   25 
     Research and development 350   -   35   - 
     Selling and marketing 362   757   55   225 
       812   857   115   250 
    (4) COVID-19 one time impact       
     Cost of product revenues 527   -   -   - 
     Cost of service revenues (7)  -   -   - 
     Research and development (57)  -   -   - 
     Selling and marketing (1)  -   -   - 
     General and administrative (11)  -   -   - 
       451   -   -   - 


     (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.


    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,
     2020 2019 2020 2019
            
     (Unaudited)   (Unaudited)
            
    Cash flows from operating activities:       
            
    Net income (loss)$(4,783) $10,167  $5,901  $4,756 
    Adjustments to reconcile net income to net cash provided by operating activities:       
    Depreciation and amortization 4,711   4,441   1,300   1,082 
    Fair value of warrants deducted from revenues 5,366   5,094   1,802   1,130 
    Share-based compensation 10,036   6,614   2,726   2,030 
    Amortization of discount on marketable securities 395   (112)  147   7 
    Realized gain on sale of marketable securities (503)  (271)  -   - 
    Decrease (increase) in trade receivables (9,529)  (18,617)  (1,596)  4,727 
    Increase in other receivables and prepaid expenses (2,333)  (1,204)  (718)  (1,609)
    Increase in inventory (15,827)  (4,183)  (6,298)  (3,076)
    Increase in operating leases right-of-use assets (56)  (571)  (27)  (623)
    Decrease (increase) in deferred taxes, net 2,177   (5)  3,000   627 
    Decrease in other long term assets 54   386   16   182 
    Increase in trade payables 6,864   6,032   6,293   5,585 
    Increase in operating lease liabilities 1,321   898   1,292   118 
    Increase in employees and payroll accruals 6,366   1,423   2,048   239 
    Increase (decrease) in deferred revenues and advances from customers 24,286   (921)  16,623   202 
    Increase in other payables and accrued expenses 4,822   1,708   2,702   54 
    Increase (decrease) in accrued severance pay, net 143   26   62   (20)
    Decrease in other long term liabilities (877)  (136)  (925)  (13)
    Loss from sale and disposal of property and Equipment 139   23   64   22 
    Foreign currency translation income (loss) on inter company balances with foreign subsidiaries (362)  212   (68)  (472)
            
    Net cash provided by operating activities 32,410   11,004   34,344   14,948 
            
    Cash flows from investing activities:       
            
    Purchase of property and equipment (13,489)  (5,416)  (2,731)  (1,351)
    Acquisition of intangible assets and capitalization of software development costs (121)  (1,337)  -   (538)
    Proceeds from sale of property and equipment 4   3   -   - 
    Cash paid in connection with acquisition (15,535)  (4,715)  (476)  - 
    Increase in bank deposits (129,804)  (90,000)  (172,996)  (1,000)
    Proceeds from sale of marketable securities 58,532   34,497   -   3,052 
    Proceeds from maturity of marketable securities 21,706   3,000   1,700   1,500 
    Purchase of marketable securities (35,923)  (115,529)  (17,381)  (70,930)
            
    Net cash used in investing activities (114,630)  (179,497)  (191,884)  (69,267)
            
            
    Cash flows from financing activities:       
            
    Proceeds from secondary offering, net 162,720   129,710   -   - 
    Payment of deferred issuance cost (739)  -   (739)  - 
    Exercise of employee stock options 5,660   5,901   718   501 
    Payments related to shares withheld for taxes (596)  (177)  (514)  (177)
    Payment of contingent consideration -   (303)  -   - 
            
    Net cash provided by (used in) financing activities 167,045   135,131   (535)  324 
            
            
            
    Foreign currency translation adjustments on cash and cash equivalents 209   (27)  172   68 
    Increase (decrease) in cash and cash equivalents 85,034   (33,389)  (157,903)  (53,927)
    Cash and cash equivalents at the beginning of the period 40,743   74,132   283,680   94,670 
    Cash and cash equivalents at the end of the period 125,777   40,743   125,777   40,743 
            
            
            
    Non-cash investing and financing activities:       
            
    Purchase of property and equipment on credit 1,904   920   1,904   920 
    Inventory transferred to be used as property and equipment 990   -   167   - 
    Property and equipment transferred to be used as inventory 115   -   64   - 
    Issuance expenses on credit -   -   -   - 
    Acquisition costs on credit -   -   -   - 
    Lease liabilities arising from obtaining right-of-use assets 2,929   9,640   160   8,307 
    Capitalization of software development costs -   112   -   112 


    Investor Contact:
    Allise Furlani
    The Blueshirt Group
    (212) 331-8433
    Allise@blueshirtgroup.com

    Contact Investor Relations

     

    Andrew G. Backman
    Global Head of Investor Relations
    Phone: 201-608-5882 [ext: 3882]
    E-mail: Andrew.Backman@kornit.com