X
View results on a new page

    Kornit Digital Reports Third Quarter 2020 Results

    November 10, 2020

    Acceleration of Digital Textile Transformation Fuels Outperformance

    • Third quarter revenue of $57.4 million, net of non-cash warrants impact of $2.2 million
    • Third quarter GAAP operating profit of $2.7 million; Non-GAAP operating profit of $6.5 million, net of $2.2 million attributed to the non-cash impact of warrants
    • Revenue growth and overall business performance exceed previous expectations
    • Milestone in sustainable services profitability achieved a quarter ahead of plan
    • Strong operating leverage, inclusive of investments in innovation and scaling go-to-market
    • Excellent momentum with Custom Gateway introduction and integration

    ROSH-HA'AYIN, Israel, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (NASDAQ: KRNT), a company that develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries, today reported results for the third quarter ended September 30, 2020.

    “We delivered a very strong third quarter, exceeding our expectations on revenue growth and profitability, as we continue to engage in exciting projects with leading global brands and fulfillers across geographies. Our industry is accelerating the transition to digital sustainable on-demand manufacturing and we have never been better positioned to meet the market opportunities ahead of us,” said Ronen Samuel, Kornit Digital’s CEO. “Looking forward, we see huge momentum in the business, and we are entering 2021 with a very strong pipeline.”

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

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

    Third Quarter Warrants Impact

     Three Months Ended
     September 30,
     2020 2019
     Net of
    Warrants
    Impact
     Warrants
    Impact
     Net of
    Warrants
    Impact
     Warrants
    Impact
            
    Revenue$57.4M $2.2M $47.3M $2.4M
    Non-GAAP Gross Margin48.1% 188bps 47.7% 255bps
    Non-GAAP Operating Margin11.3% 322bps 13.0% 425bps
    Non-GAAP Net Margin13.5% 314bps 13.9% 420bps
    Non-GAAP Diluted Earnings Per Share$0.18 $0.05 $0.16 $0.05
             

    “We are very pleased with our business acceleration as third quarter revenue of $57.4 million, net of $2.2 million attributed to the non-cash impact of warrants reflects an increase of 21.4 percent year-over-year. Customers and partners are ramping production not only to meet the upcoming holiday season but also the unprecedented and sustained demand in e-commerce,” said Guy Avidan, Kornit Digital’s Chief Financial Officer. “Given third quarter outperformance and the strength of our pipeline we are raising our previously provided second-half 2020 revenue outlook from low double-digit to 25 percent year-over-year growth.”

    Third Quarter 2020 Results of Operations

    • Total revenue for the third quarter of 2020 was $57.4 million, net of $2.2 million attributed to the non-cash impact of warrants, compared to $47.3 million, net of $2.4 million attributed to the non-cash impact of warrants in the prior year period.
    • GAAP net income for the third quarter of 2020 was $3.9 million, or $0.09 per diluted share, compared to net income of $4.7 million, or $0.11 per diluted share, for the third quarter of 2019.
    • Non-GAAP net income for the third quarter of 2020 was $7.7 million, or $0.18 per diluted share, including $0.05 per diluted share attributed to the non-cash impact of warrants, compared to non-GAAP net income of $6.6 million, or $0.16 per diluted share, net of $0.05 per diluted share attributed to the non-cash impact of warrants, for the third quarter of 2019.

    Fourth Quarter 2020 Guidance

    The Company will discuss its expectations for the fourth quarter of 2020 live during its earnings conference call, which will be available for replay via webcast at ir.kornit.com, as referenced below.

    Third 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 13711406.

    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 13711406. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, November 10, 2020, until 11:59 p.m. ET on Tuesday, November 24, 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 duration of the global COVID-19 pandemic, which, if extending for further significant periods of time, may continue to impact, 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 on March 23, 2020. 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, 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) 
      September 30, December 31,
      2020 2019 
      (Unaudited)   
    ASSETS     
    CURRENT ASSETS:     
    Cash and cash equivalents $283,680 $40,743 
    Short-term bank deposit  51,808  95,000 
    Marketable securities  10,723  32,567 
    Trade receivables, net  49,685  40,510 
    Inventory  46,268  37,477 
    Other accounts receivable and prepaid expenses  8,495  6,985 
    Total current assets  450,659  253,282 
          
    LONG-TERM ASSETS:     
    Marketable securities  59,057  95,393 
    Deposits and prepaid expenses  406  356 
    Severance pay fund  297  301 
    Deferred taxes  7,067  7,781 
    Property, plant and equipment, net  25,844  17,489 
    Operating lease right-of-use assets  21,837  22,806 
    Intangible assets, net  11,474  2,494 
    Goodwill  13,629  5,564 
    Total long-term assets  139,611  152,184 
          
    Total assets $590,270 $405,466 
          
    LIABILITIES AND SHAREHOLDERS' EQUITY     
    CURRENT LIABILITIES:     
    Trade payables $24,812 $23,449 
    Employees and payroll accruals  13,434  9,165 
    Deferred revenues and advances from customers  10,373  2,688 
    Operating lease liabilities  3,893  3,902 
    Other payables and accrued expenses  9,421  6,373 
    Total current liabilities  61,933  45,577 
          
    LONG-TERM LIABILITIES:     
    Accrued severance pay  1,112  1,035 
    Operating lease liabilities  18,271  19,231 
    Other long-term liabilities  1,368  1,320 
    Total long-term liabilities  20,751  21,586 
          
    SHAREHOLDERS' EQUITY  507,586  338,303 
          
    Total liabilities and shareholders' equity $590,270 $405,466 
          



    KORNIT DIGITAL LTD.
    AND ITS SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (U.S. dollars in thousands, except share and per share data)
            
     Nine Months Ended Three Months Ended
     September 30, September 30,
      2020   2019  2020  2019 
                  
     (Unaudited) (Unaudited)
            
    Revenues       
    Products$103,536  $114,347 $49,290 $43,317 
    Services 17,504   16,869  8,102  3,976 
    Total revenues 121,040   131,216  57,392  47,293 
            
    Cost of revenues       
    Products 50,117   53,311  23,031  19,102 
    Services 20,066   19,863  7,330  5,972 
    Total cost of revenues 70,183   73,174  30,361  25,074 
            
    Gross profit 50,857   58,042  27,031  22,219 
            
    Operating expenses:       
    Research and development 22,213   16,386  8,689  5,610 
    Selling and marketing 25,375   24,322  8,587  7,849 
    General and administrative 18,957   13,044  7,093  4,688 
    Total operating expenses 66,545   53,752  24,369  18,147 
    Operating income (loss) (15,688)  4,290  2,662  4,072 
    Financial income, net 4,427   1,127  1,630  582 
    Income (loss) before taxes on income (11,261)  5,417  4,292  4,654 
            
    Taxes on income (Tax benefit) (577)  6  350  (14)
    Net income (loss) (10,684)  5,411  3,942  4,668 
            
    Basic earnings (losses) per share$(0.26) $0.15 $0.09 $0.12 
            
    Weighted average number of shares       
    used in computing basic earnings (losses)       
    per share 41,059,090   37,208,558  41,536,835  40,471,832 
            
            
    Diluted earnings (losses) per share$(0.26) $0.14 $0.09 $0.11 
            
    Weighted average number of shares       
    used in computing diluted earnings (losses)      
    per share 41,059,090   38,584,788  42,692,989  42,159,655 
            



        
    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)
             
      Nine Months Ended Three Months Ended
      September 30, September 30,
       2020   2019   2020   2019 
                     
      (Unaudited) (Unaudited)
             
    GAAP cost of revenues$70,183  $73,174  $30,361  $25,074 
    Cost of product recorded for share-based compensation (1) (772)  (419)  (281)  (182)
    Cost of service recorded for share-based compensation (1) (568)  (374)  (208)  (144)
    Intangible assets amortization on cost of product (3) (75)  (75)  (25)  (25)
    Excess cost of product on acquired inventory (a) -   (2,790)  -   - 
    Acquisition related expenses (2) -   (28)  -   - 
    COVID-19 one time impact (4) (520)  -   (74)  - 
    Non-GAAP cost of revenues$68,248  $69,488  $29,773  $24,723 
             
    GAAP gross profit$50,857  $58,042  $27,031  $22,219 
    Gross profit adjustments 1,935   3,686   588   351 
    Non-GAAP gross profit$52,792  $61,728  $27,619  $22,570 
             
    GAAP operating expenses$66,545  $53,752  $24,369  $18,147 
    Share-based compensation (1) (5,970)  (3,791)  (2,191)  (1,515)
    Acquisition related expenses (2) (648)  (57)  (648)  - 
    Intangible assets amortization (3) (622)  (532)  (371)  (224)
    COVID-19 one time impact (4)  69   -   -   - 
    Non-GAAP operating expenses$59,374  $49,372  $21,159  $16,408 
             
    GAAP Financial income$4,427  $1,127  $1,630  $582 
    Foreign exchange losses associated with ASC 842 28   780   110   242 
    Non-GAAP Financial income$4,455  $1,907  $1,740  $824 
             
    GAAP Taxes on income (Tax benefit)$(577) $6  $350  $(14)
    Tax effect on to the above non-GAAP adjustments 346   933   526   62 
    Taxes on income (Tax benefit) (b) 610   807   (405)  347 
    Non-GAAP Taxes on income (Tax benefit)$379  $1,746  $471  $395 
             
    GAAP net income (loss)$(10,684) $5,411  $3,942  $4,668 
    Share-based compensation (1) 7,310   4,584   2,680   1,841 
    Acquisition related expenses (2) 648   85   648   - 
    Intangible assets amortization (3) 697   607   396   249 
    COVID-19 one time impact (4)  451   -   74   - 
    Excess cost of product on acquired inventory (a) -   2,790   -   - 
    Foreign exchange losses associated with ASC 842 28   780   110   242 
    Tax effect on to the above non-GAAP adjustments (346)  (933)  (526)  (62)
    Deferred taxes on income (Tax benefit) (b) (610)  (807)  405   (347)
    Non-GAAP net income (loss)$(2,506) $12,517  $7,729  $6,591 
             
    GAAP diluted earnings (losses) per share$(0.26) $0.14  $0.09  $0.11 
             
    Non-GAAP diluted earnings (losses) per share$(0.06) $0.32  $0.18  $0.16 
             
    Weighted average number of shares       
             
    Shares used in computing GAAP diluted net earnings (losses) per share  41,059,090   38,584,788   42,692,989   42,159,655 
             
    Shares used in computing Non-GAAP diluted net earnings (losses) per share 41,059,090   38,753,127   42,972,182   42,247,859 
             
    (1) Share-based compensation       
     Cost of product revenues 772   419   281   182 
     Cost of service revenues 568   374   208   144 
     Research and development 1,243   934   463   334 
     Selling and marketing 2,150   1,132   769   496 
     General and administrative 2,635   1,725   1,017   685 
       7,368   4,584   2,738   1,841 
    (2) Acquisition related expenses       
     Cost of product revenues -   28   -   - 
     Research and development -   -   -   - 
     Selling and marketing -   14   -   - 
     General and administrative 648   43   648   - 
       648   85   648   - 
    (3) Intangible assets amortization       
     Cost of product revenues 75   75   25   25 
     Research and development 315   -   315   - 
     Selling and marketing 307   532   56   224 
       697   607   396   249 
    (4) COVID-19 one time impact       
     Cost of product revenues 527   -   74   - 
     Cost of service revenues (7)  -   -   - 
     Research and development (57)  -   -   - 
     Selling and marketing (1)  -   -   - 
     General and administrative (11)  -   -   - 
       451   -   74   - 
             
    (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)
        
     Nine Months Ended Three Months Ended
     September 30, September 30,
      2020   2019   2020   2019 
                    
     (Unaudited) (Unaudited)
            
    Cash flows from operating activities:       
            
    Net income (loss)$(10,684)  $5,411  $3,942  $4,668 
    Adjustments to reconcile net income to net cash provided by operating activities:       
    Depreciation and amortization 3,411   3,359   1,215   1,137 
    Fair value of warrants deducted from revenues 3,564   3,964   2,158   2,430 
    Share-based compensation 7,310   4,584   2,680   1,841 
    Amortization of discount on marketable securities 248   (119)  83   (35)
    Realized gain on sale of marketable securities (503)  (271)  (401)  - 
    Increase in trade receivables (7,933)  (23,344)  (8,549)  (11,181)
    Decrease (increase) in other receivables and prepaid expenses (1,615)  405   (771)  (345)
    Decrease (increase) in inventory (9,529)  (1,107)  (4,324)  418 
    Decrease (increase) in operating leases right-of-use assets (29)  52   (62)  18 
    Decrease (increase) in deferred taxes, net (823)  (632)  561   14 
    Decrease in other long term assets 38   204   120   - 
    Increase (decrease) in trade payables 571   447   10,462   (3,335)
    Increase in operating lease liabilities 29   780   111   242 
    Increase in employees and payroll accruals 4,318   1,184   3,983   1,967 
    Increase (decrease) in deferred revenues and advances from customers 7,663   (1,123)  7,770   651 
    Increase in other payables and accrued expenses 2,120   1,654   1,688   702 
    Increase in accrued severance pay, net 81   46   18   39 
    Increase (decrease) in other long term liabilities 48   (123)  191   87 
    Loss from sale and disposal of property and Equipment 75   1   -   1 
    Foreign currency translation income (loss) on inter company balances with foreign subsidiaries (294)  684   (477)  673 
            
    Net cash provided by (used in) operating activities (1,934)  (3,944)  20,398   (8)
            
    Cash flows from investing activities:       
            
    Purchase of property and equipment (10,758)  (4,065)  (2,247)  (2,101)
    Acquisition of intangible assets and capitalization of software development costs (121)  (799)  -   (149)
    Proceeds from sale of property and equipment 4   3   -   3 
    Cash paid in connection with acquisition (15,059)  (4,715)  (15,059)  - 
    Decrease (increase) in bank deposits 43,192   (89,000)  27,996   (12,000)
    Proceeds from sale of marketable securities 58,532   31,445   37,730   1,000 
    Proceeds from maturity of marketable securities 20,006   1,500   2,561   1,000 
    Purchase of marketable securities (18,542)  (44,599)  -   - 
            
    Net cash provided by (used in) investing activities 77,254   (110,230)  50,981   (12,247)
            
            
    Cash flows from financing activities:       
            
    Proceeds from secondary offering, net 162,720   129,710   162,720   (669)
    Exercise of employee stock options 4,942   5,400   2,138   3,131 
    Payments related to shares withheld for taxes (82)  -   (18)  - 
    Payment of contingent consideration -   (303)  -   - 
            
    Net cash provided by financing activities 167,580   134,807   164,840   2,462 
            
            
            
    Foreign currency translation adjustments on cash and cash equivalents 37   (95)  13   (87)
    Increase (decrease) in cash and cash equivalents 242,937   20,538   236,232   (9,880)
    Cash and cash equivalents at the beginning of the period 40,743   74,132   47,448   104,550 
    Cash and cash equivalents at the end of the period 283,680   94,670   283,680   94,670 
            
            
            
    Non-cash investing and financing activities:       
            
    Purchase of property and equipment on credit  382   359   382   359 
    Inventory transferred to be used as property and equipment 823   167   312   167 
    Property and equipment transferred to be used as inventory 51   -   -   - 
    Issuance expenses on credit  739   -   739   - 
    Acquisition costs on credit 204   -   204   - 
    Lease liabilities arising from obtaining right-of-use assets  2,769   1,333   849   531 
    Capitalization of software development costs -   151   -   151 
            


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