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    Kornit Digital Reports Second Quarter 2022 Results

    August 10, 2022
    • Second quarter revenues of $58.1 million, net of non-cash warrants impact of $4.5 million, in line with preliminary results issued on July 5, 2022
    • Second quarter GAAP operating loss of $24.9 million; Non-GAAP operating loss of $18.3 million, net of $4.5 million attributed to the non-cash impact of warrants
    • Board of Directors approves $75 million share repurchase program
    • Announces CFO transition; Industry veteran Lauri Hanover to join Kornit executive management team as Chief Financial Officer

    ROSH-HA`AYIN, Israel, Aug. 10, 2022 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (“Kornit” or “the Company”) (Nasdaq: KRNT), a worldwide market leader in sustainable, on-demand, digital fashionX and textile production technologies, reported today results for the second quarter ended June 30, 2022.

    “While the overall operating environment remains challenging, we believe the industry will continue its long-term secular growth, fueled by the mega-trends we’ve discussed in the past,” said Ronen Samuel, Kornit Digital’s Chief Executive Officer. “We are navigating the current market dynamics by working closely with global brands, retailers and fulfillers to shift production volumes to on-demand, executing on new product introductions and adoption of these innovative technologies, and focusing on returning to profitability.”

    Mr. Samuel continued, “Our vision remains unchanged and we remain extremely confident in the fundamentals of the business. With our solid financial foundation and dedicated global team of professionals, we continue to be laser focused on leading the industry’s transformation from analog manufacturing to sustainable on-demand digital production.”

    The following table compares the adverse, non-cash impact that the Company’s outstanding warrants had on the Company’s results of operations during the second quarters of 2022 and 2021, respectively:

    Second Quarter Warrants Impact

     Three Months Ended 
     June 30, 
      2022   2021 
     Net of Warrants Impact Warrants Impact  Net of Warrants Impact Warrants Impact
            
    Revenue$58.1M $4.5M $81.7M $ 6.6M
    Non-GAAP Gross Margin 38.6%  4.4%  48.2%  3.9%
    Non-GAAP Operating Margin (31.4%)  9.5%  12.5%  6.5%
    Non-GAAP Net Margin (26.8%)  9.1%  12.8%  6.5%
    Non-GAAP Diluted Earnings Per Share($0.31) $0.09  $0.22  $0.13 

    “We continue to strategically look at all aspects of our business and are adjusting our cost structure as needed, including a recent focused reduction-in-force, while reallocating resources to key growth initiatives and investments in long-term programs that support our customers’ needs,” said Alon Rozner, Kornit Digital’s Chief Financial Officer. “Our extremely strong balance sheet provides us with a great foundation to navigate the current market conditions and volatility, while focusing on longer-term opportunities to drive profitable growth.”

    Second Quarter 2022 Results of Operations

    • Total revenue for the second quarter of 2022 was $58.1 million, net of $4.5 million attributed to the non-cash impact of warrants, compared to $81.7 million, net of $6.6 million attributed to the non-cash impact of warrants in the prior year period.

    • GAAP net loss for the second quarter of 2022 was $19.5 million, or ($0.39) per basic share, compared to net income of $5.6 million, or $0.12 per diluted share, for the second quarter of 2021.

    • Non-GAAP net loss for the second quarter of 2022 was $15.6 million, or ($0.31) per basic share, net of $0.09 per basic share attributed to the non-cash impact of warrants, compared to non-GAAP net income of $10.5 million, or $0.22 per diluted share, net of $0.13 per diluted share attributed to the non-cash impact of warrants, for the second quarter of 2021.

    Third Quarter 2022 Guidance

    For the third quarter of 2022, the Company expects revenue to be in the range of $66 million to $70 million; non-GAAP operating margins to be in the range of -15% to -11% of revenue; EBITDA Margins to be in the range of -12% to -8%. Consistent with past practice, this guidance excludes the impact of the fair value of issued warrants in the quarter.

    $75 million Share Repurchase Authorization

    The Company announced today that its Board of Directors has authorized the repurchase of up to $75 million of the Company’s ordinary shares, subject to the completion of required Israeli regulatory procedures.

    “A share repurchase program is a flexible way to return capital to our shareholders when we see significant value in our stock,” said Mr. Rozner. “In evaluating our capital allocation plans and the current trading levels of our stock, the Board and management believe that using a portion of the cash on our extremely strong balance sheet – which included approximately $705 million in cash, cash equivalents, and marketable securities at the end of the second quarter – for repurchases of our ordinary shares is in the best interests of the Company and its shareholders, and will not adversely impact our ability to execute on our growth plans.”

    The program is subject to Kornit’s Board of Directors’ final confirmation that the Company meets certain liquidity-related requirements under the Israeli Companies Law, as well as Kornit’s receipt of Israeli court approval, which would cover an initial period of six months, after which period renewed court approval would be needed to continue the program. The court approval process is expected to take several months. If and when the Company receives court approval, repurchases may be made from time to time through open market repurchases or through privately negotiated transactions, subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases will be effected in accordance with the requirements of Rule 10b-18 under the Exchange Act. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The repurchase program does not obligate the Company to acquire any particular amount of its ordinary shares, and it may be modified, suspended, or terminated, at any time at the Company’s discretion. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.

    Announces CFO Transition

    The Company also announced that Alon Rozner, Chief Financial Officer, will leave the Company for personal reasons. Kornit is pleased to appoint Lauri Hanover as the Company’s new CFO. To ensure an orderly transition, Mr. Rozner will continue as CFO until his expected departure in November.

    Since March 2015, Ms. Hanover has served as a member of the Company’s Board of Directors. Ms. Hanover has over 25 years of CFO experience and financial expertise in the software, hardware, consumer goods, and industrials sectors. Ms. Hanover holds a B.A. from the University of Pennsylvania, a B.S. in Economics from The Wharton School of the University of Pennsylvania, as well as an M.B.A. from New York University.

    Ms. Hanover will continue as a member of the Company’s Board of Directors (“Board”), but will step down as the Company’s Audit Committee Chair and as member of the Compensation Committee effective immediately. Current Board members Mr. Dov Ofer will assume the role of Audit Chairperson and Mr. Gabi Seligsohn will join the Audit Committee, while Mr. Stephen Nigro will join the Compensation Committee. Each of the foregoing individuals heading or joining those committees of the Board is an independent director and possesses the requisite credentials for the relevant role under the Nasdaq Listing Rules.

    “Alon has been an integral member of our executive management team and an immensely valued colleague to everyone here at Kornit,” said Ronen Samuel. “His exceptional leadership and vital contributions further strengthened and expanded the financial foundation of the firm, especially through the global pandemic. We wish him only the best in the future.”

    “It has been a pleasure to serve as Kornit’s CFO and to work with such an amazing team across the world,” said Alon Rozner. “I have the utmost confidence in the Company, its strategy, and its leadership team, and have no doubt the Company will successfully transform the fashion and textile industry. I look forward to working with Lauri on a successful transition and wish everyone at Kornit tremendous success.”

    Commenting on her appointment, Ms. Hanover added, “I am truly honored to undertake this role with Kornit in a new capacity as CFO and look forward to working with Alon on the transition, and with the entire management team to execute on our long-term strategy and drive value creation.”

    Second Quarter Earnings Conference Call Information

    The Company will host a conference call today at 8:30 a.m. ET, or 3:30 p.m. Israel time, to discuss the results, followed by a question-and-answer session with 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 1-877-300-8521 or +1-412-317-6026. The toll-free Israeli number is 1-809-213-284. The conference confirmation code is 10169717.

    To listen to a replay of the conference call, dial toll-free 1-844-512-2921 or +1-412-317-6671 (international) and enter confirmation code 10169717. The telephonic replay will be available approximately two hours after the completion of the live call until 11:59 pm ET on Wednesday, August 24, 2022. The call will also be available for replay via the webcast link on Kornit’s Investor Relations website.

    About Kornit Digital

    Kornit Digital (NASDAQ: KRNT) is a worldwide market leader in sustainable, on-demand, digital fashionx and textile production technologies. The Company is writing the operating system for fashion with end-to-end solutions including digital printing systems, inks, consumables, and an entire global ecosystem that manages workflows and fulfillment. Headquartered in Israel with offices in the USA, Europe, and Asia Pacific, Kornit Digital serves customers in more than one hundred countries and states worldwide. To learn more about how Kornit Digital is boldly transforming the world of fashion and textiles, visit www.kornit.com.

    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 Company’s degree of success in developing, introducing and selling new or improved products and product enhancements including specifically the Company’s Poly Pro and Presto products; the extent of the Company’s ability to consummate sales to large accounts with multi-system delivery plans; the degree of the Company’s ability to fill orders for Kornit’s systems; the extent of the Company’s ability to increase sales of Kornit’s systems, ink and consumables; the extent of the Company’s ability to leverage Kornit’s global infrastructure build-out; the development of the market for digital textile printing; the availability of alternative ink; competition; sales concentration; changes to the Company’s relationships with suppliers; the extent of the Company’s success in marketing; the duration and severity of the adverse macro-economic trends triggered by the global COVID-19 pandemic, such as supply-chain delays inflationary pressures, and rising interest rates, which could potentially impact, in a material adverse manner, the Company’s operations, financial position and cash flows, and those of the Company’s customers and suppliers; receipt of court approval to effect the Company’s proposed share repurchase program; 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, 2021, filed with the SEC on March 30, 2022. 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

    The non-GAAP financial measures presented consist of GAAP financial measures adjusted to exclude the impact of share-based compensation expenses, amortization of acquired intangible assets, acquisition related expenses, foreign exchange differences associated with ASC 842 and the related tax effect of the foregoing. The purpose of such adjustments is to provide an indication of the Company’s performance exclusive of non-cash charges and other items that are considered by management to be outside of the Company’s 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 the Company’s business and make operating decisions, and the Company believes that they are useful to investors as a consistent and comparable measure of the ongoing performance of the Company’s business. However, the Company’s 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 the Company’s 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.

    Investor Contact:                                                        
    Andrew G. Backman
    Global Head of Investor Relations
    andrew.backman@kornit.com     

     KORNIT DIGITAL LTD. 
     AND ITS SUBSIDIARIES 
     CONSOLIDATED  BALANCE  SHEETS 
     (U.S. dollars in thousands) 
       June 30, December 31, 
        2022  2021 
       (Unaudited)   
     ASSETS     
     CURRENT ASSETS:     
     Cash and cash equivalents $       196,611 $      611,551 
     Short-term bank deposit  260,063  9,168 
     Marketable securities  21,726  28,116 
     Trade receivables, net  60,473  49,797 
     Inventory  89,580  63,017 
     Other accounts receivable and prepaid expenses  13,465  13,694 
     Total current assets  641,918  775,343 
           
     LONG-TERM ASSETS:     
     Marketable securities $       226,173 $      149,269 
     Deposits and other long-term assets  2,531  856 
     Severance pay fund  323  357 
     Deferred taxes  14,153  9,339 
     Property,plant and equipment, net  53,189  45,046 
     Operating lease right-of-use assets  28,658  25,155 
     Intangible assets, net  11,271  10,063 
     Goodwill  29,164  25,447 
     Total long-term assets  365,462  265,532 
           
     Total assets $    1,007,380 $   1,040,875 
           
     LIABILITIES AND SHAREHOLDERS' EQUITY    
     CURRENT LIABILITIES:     
     Trade payables $         30,788 $        46,448 
     Employees and payroll accruals  15,364  22,482 
     Deferred revenues and advances from customers  3,013  5,401 
     Operating lease liabilities  5,071  5,058 
     Other payables and accrued expenses  21,046  17,287 
     Total current liabilities  75,282  96,676 
           
     LONG-TERM LIABILITIES:     
     Accrued severance pay $           1,217 $          1,543 
     Operating lease liabilities  22,533  21,900 
     Other long-term liabilities  1,932  1,203 
     Total long-term liabilities  25,682  24,646 
           
     SHAREHOLDERS' EQUITY  906,416  919,553 
           
     Total liabilities and shareholders' equity $    1,007,380 $   1,040,875 
           

     

     KORNIT DIGITAL LTD. 
     AND ITS SUBSIDIARIES 
     CONSOLIDATED STATEMENTS OF OPERATIONS 
     (U.S. dollars in thousands, except share and per share data)   
              
      Three Months Ended Six Months Ended 
      June 30, June 30, 
       2022   2021  2022   2021 
      (Unaudited) (Unaudited) 
              
     Revenues        
          Products$       47,566  $      72,176 $          120,080  $    130,122 
          Services 10,570   9,490  21,349   17,667 
     Total revenues 58,136   81,666  141,429   147,789 
              
     Cost of revenues        
           Products 25,667   34,254  64,904   62,429 
           Services 11,937   8,830  22,591   16,368 
     Total cost of revenues 37,604   43,084  87,495   78,797 
              
     Gross profit   20,532   38,582  53,934   68,992 
              
     Operating expenses:        
     Research and development, net 14,081   9,799  28,091   19,243 
     Sales and marketing 21,100   13,830  37,631   24,879 
     General and administrative 10,250   8,881  20,016   15,689 
     Total operating expenses 45,431   32,510  85,738   59,811 
     Operating income (loss) (24,899)  6,072  (31,804)  9,181 
     Financial income, net 4,324   351  6,123   2,416 
     Income (loss) before taxes on income (tax benefits) (20,575)  6,423  (25,681)  11,597 
              
     Taxes on income (tax benefits) (1,099)  821  (1,008)  896 
     Net income (loss) (19,476)  5,602  (24,673)  10,701 
              
     Basic net income (loss) per share$          (0.39) $          0.12 $               (0.50) $           0.23 
              
     Weighted average number of shares        
     used in computing basic net         
     income (loss) per share 49,756,990   46,196,720  49,707,782   46,119,416 
              
              
     Diluted net income (loss) per share$          (0.39) $          0.12 $               (0.50) $           0.22 
              
     Weighted average number of shares        
     used in computing diluted        
     net income (loss) per share   49,756,990   47,849,783         49,707,782   47,709,429 
              

     

           
     KORNIT DIGITAL LTD. 
     AND ITS SUBSIDIARIES 
     RECONCILATION OF GAAP TO NON-GAAP  CONSOLIDATED  STATEMENTS  OF  OPERATIONS 
     (U.S. dollars in thousands, except share and per share data) 
                 
       Three Months Ended   Six Months Ended 
       June 30,   June 30, 
        2022   2021     2022   2021  
       (Unaudited)   (Unaudited) 
                 
      Revenues  $           58,136  $       81,666    $     141,429  $     147,789  
                 
                 
      GAAP cost of revenues $           37,604  $       43,084    $       87,495  $       78,797  
     Cost of product recorded for share-based compensation (1) (606)  (320)    (1,055)  (619) 
     Cost of service recorded for share-based compensation (1) (461)  (266)    (846)  (499) 
     Intangible assets amortization on cost of product (3) (666)  (25)    (839)  (50) 
     Intangible assets amortization on cost of service (3) (160)  (160)    (320)  (320) 
      Non-GAAP cost of revenues $           35,711  $       42,313    $       84,435  $       77,309  
                 
                 
     GAAP gross profit$           20,532  $       38,582    $       53,934  $       68,992  
     Gross profit adjustments 1,893   771     3,060   1,488  
     Non-GAAP gross profit$           22,425  $       39,353    $       56,994  $       70,480  
                 
                 
      GAAP operating expenses $           45,431  $       32,510    $       85,738  $       59,811  
     Share-based compensation (1) (4,414)  (3,241)    (8,878)  (5,781) 
     Acquisition related expenses (2) -   -     (512)  -  
     Intangible assets amortization (3) (333)  (119)    (419)  (238) 
      Non-GAAP operating expenses $           40,684  $       29,150    $       75,929  $       53,792  
                 
                 
      GAAP Financial income, net $             4,324  $             351    $          6,123  $          2,416  
     Foreign exchange losses associated with ASC 842 (2,480)  387     (3,129)  (415) 
      Non-GAAP Financial income , net $             1,844  $             738    $          2,994  $          2,001  
                 
                 
     GAAP Taxes on income (tax benefit)$           (1,099) $             821    $        (1,008) $             896  
     Tax effect on to the above non-GAAP adjustments  (187)  (26)    140   165  
     Deferred tax benefit based on an Israeli statutory tax rate 437   (338)    327   (586) 
     Non-GAAP Taxes on income (tax benefit) $              (849) $             457    $           (541) $             475  
                 
                 
      GAAP net income (loss) $         (19,476) $          5,602    $     (24,673) $       10,701  
     Share-based compensation (1) 5,481   3,827     10,779               6,899  
     Acquisition related expenses (2) -   -     512                     -    
     Intangible assets amortization (3) 1,159   304     1,578                  608  
     Foreign exchange losses associated with ASC 842 (2,480)  387     (3,129)  (415) 
     Tax effect of  the above non-GAAP adjustments  187   26     (140)  (165) 
     Deferred tax benefit at the Israeli statutory tax rate (437)  338     (327)  586  
      Non-GAAP net income (Loss) $         (15,566) $       10,484    $     (15,400) $       18,214  
                 
      GAAP diluted earning (loss) per share  $             (0.39) $            0.12    $          (0.50) $            0.22  
                 
      Non-GAAP diluted earning (loss) per share  $             (0.31) $            0.22    $          (0.31) $            0.38  
                 
     Weighted average number of shares          
                 
     Shares used in computing GAAP diluted net earning (loss) per share 49,756,990     47,849,783       49,707,782     47,709,429  
                 
     Shares used in computing Non-GAAP diluted net earning (loss) per share 49,756,990   48,189,266       49,707,782     47,941,113  
                 
                 
     (1) Share-based compensation          
      Cost of product revenues$                606  $             320    $          1,055  $             619  
      Cost of service revenues 461   266     846                  499  
      Research and development  1,268   569     2,457               1,071  
      Sales and marketing 1,491   1,261     3,300               2,333  
      General and administrative 1,655   1,411     3,121               2,377  
       $             5,481  $          3,827    $       10,779  $          6,899  
     (2) Acquisition related expenses          
      General and administrative$                    -    $                -      $             512  $                -    
       $                    -    $                -      $             512  $                -    
     (3) Intangible assets amortization           
      Cost of product revenues$                666  $               25    $             839  $               50  
      Cost of service revenues 160   160     320                  320  
      Sales and marketing 333                  119     419                  238  
       $             1,159  $             304    $          1,578  $             608  
                 
                 

     

     KORNIT DIGITAL LTD. 
     AND ITS SUBSIDIARIES 
     CONSOLIDATED STATEMENTS OF CASH FLOWS  
     (U.S. dollars in thousands) 
       
      Three Months Ended Six Months Ended 
      June 30, June 30, 
       2022   2021   2022   2021  
      (Unaudited) (Unaudited) 
     Cash flows from operating activities:        
              
     Net income (loss)$    (19,476) $        5,602  $    (24,673) $    10,701  
     Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:        
     Depreciation and amortization 3,322   1,543   5,902   3,035  
     Fair value of warrants deducted from revenues 4,516   6,572   12,521   9,711  
     Share-based compensation 5,481   3,827   10,779   6,899  
     Amortization of premium and accretion of discount on marketable securities, net 484   (481)  1,012   (1,298) 
     Realized gain on sale and redemption of marketable securities  7   -   10   -  
     Change in operating assets and liabilities:        
     Trade receivables, net 22,189   (9,597)  (9,004)  (11,085) 
     Other accounts receivables and prepaid expenses 673   (3,063)  (1,791)  (1,513) 
     Inventory (14,816)  146   (23,852)  (526) 
     Operating leases right-of-use assets and liabilities, net  (2,449)  337   (2,857)  (519) 
     Deferred taxes (2,111)  565   (2,416)  245  
     Deposits and other long term assets  (1,327)  (121)  (1,321)  (131) 
     Trade payables (4,476)  3,639   (11,920)  (2,417) 
     Employees and payroll accruals (364)  (131)  (6,834)  2,104  
     Deferred revenues and advances from customers (2,643)  (8,029)  (4,114)  (11,401) 
     Other payables and accrued expenses 3,081   3,822   3,440   5,676  
     Accrued severance pay, net (103)  79   (292)  49  
     Other long - term liabilities  413   501   729   800  
     Loss from sale and disposal of property, plant and Equipment 41   -   41   -  
     Net cash provided by (used in) operating activities          (7,558)             5,211         (54,640)         10,330  
              
     Cash flows from investing activities:        
              
     Purchase of property, plant and equipment (1,985)  (2,988)  (9,447)  (5,555) 
     Investment in equity securities (354)  -   (354)  -  
     Acquisition of intangible assets (133)  -   (133)  -  
     Proceeds from sale of property, plant  and equipment 55   -   55   -  
     Cash paid in connection with acquisition, net of cash acquired (14,654)  -   (14,654)  -  
     Proceeds from (Investment in) bank deposits 160,090   8,723   (250,895)  (10,132) 
     Proceeds from sales and redemption of marketable securities 1,500   2,050   1,945   2,050  
     Proceeds from maturity of marketable securities 5,500   -   17,422   -  
     Investment in marketable securities (23,003)  (15,220)  (103,897)  (30,510) 
              
     Net cash provided by (used in) investing activities       127,016            (7,435)      (359,958)       (44,147) 
              
              
     Cash flows from financing activities:        
              
     Exercise of employee stock options  41   1,079   340   1,754  
     Payments related to shares withheld for taxes  (172)  (458)  (682)  (1,146) 
     Net cash provided by (used in) financing activities           (131)              621            (342)            608  
              
              
              
     Increase (decrease) in cash and cash equivalents 119,327   (1,603)  (414,940)  (33,209) 
     Cash and cash equivalents at the beginning of the period         77,284   94,171   611,551   125,777  
     Cash and cash equivalents at the end of the period$    196,611  $      92,568  $   196,611  $    92,568  
              
              
              
     
    Non-cash investing and financing activities:
            
              
     Purchase of property and equipment on credit             1,823   2,678   1,823   2,678  
     Inventory transferred to be used as property and equipment               592   51   1,289   463  
     Property, plant and equipment transferred to be used as inventory                   5   -   9   3  
     Receipt on account of shares 27   32   27   32  
     Lease liabilities arising from obtaining right-of-use assets               641   1,033   6,387   1,296  
              

     

     


    Contact Investor Relations

     

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