UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2018

 

Commission File Number 001-36903

 

KORNIT DIGITAL LTD.

(Translation of Registrant’s name into English)

 

12 Ha’Amal Street

Park Afek

Rosh Ha’Ayin 4824096 Israel

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒    Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

 

 

CONTENTS

 

On November 12, 2018, Kornit Digital Ltd. issued a press release entitled “Kornit Digital Reports 2018 Third Quarter Results.” A copy of that press release is furnished as Exhibit 99.1 hereto.

 

The U.S. GAAP financial information contained in the (i) consolidated statements of operations, (ii) consolidated balance sheets and (iii) consolidated statements of cash flows included in the press release attached as Exhibit 99.1 to this Report of Foreign Private Issuer on Form 6-K is hereby incorporated by reference into the Registrant’s Registration Statements on Form F-3 (File No. 333-215404) and Form S-8 (File No.’s 333-203970, 333-214015, 333-217039 and 333-223794).

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	KORNIT DIGITAL LTD.
Date: November 13, 2018	By:	/s/ Guy Avidan
	Name:	Guy Avidan
	Title:	Chief Financial Officer

 

 

Exhibit Index

 

Exhibit No.		Description
99.1		Press release dated November 12, 2018 entitled “Kornit Digital Reports 2018 Third Quarter Results”

 

 

3

Exhibit 99.1

 

Investor Contact:

Michael Callahan, ICR

(203) 682-8311

Michael.Callahan@icrinc.com

 

 

 

Kornit Digital Reports 2018 Third Quarter Results

 

Highlights

 

●	Third quarter 2018 revenues increased by 32.1% to $37.6 million, net of $1.7 million attributed to the non-cash impact of warrants, compared to $28.4 million, net of $0.1 million attributed to the non-cash impact of warrants in the prior year period.

●	Third quarter 2018 GAAP operating income of $3.1 million, or 8.2% of revenue; non-GAAP operating income of $4.9 million, or 13% of revenue, net of 367 basis points attributed to the non-cash impact of warrants.

●	Third quarter 2018 GAAP net income of $3.1 million, or $0.09 per diluted share; non-GAAP net income of $4.8 million, or $0.13 per diluted share.

●	Third quarter warrants impact on Non-GAAP Gross margin was 206 basis points, operating margin 367 basis points and Non-GAAP net margin 368 basis points.

●	Company continues to benefit from the market success of HD with orders of more than 200 systems and upgrades to date.

 

Rosh-Ha’Ayin, Israel – November 12, 2018 – Kornit Digital Ltd. (NASDAQ: KRNT), a leading provider of digital printing solutions for the global printed textile industry, today reported results for the third quarter ended September 30, 2018.

 

Beginning as of the fourth-quarter of 2017, non-GAAP figures are presented using a different methodology compared to previous periods as a result of comments received from the U.S. Securities and Exchange Commission. These changes also impact the Company’s guidance methodology, the details of which can be found at the end of today’s press release.

 

Kornit reported that third quarter 2018 revenue increased by 32.1% to $37.6 million, net of $1.7 million attributed to the non-cash impact of warrants, compared to the prior year period of $28.4 million, net of $0.1 million attributed to the non-cash impact of warrants. Higher revenue in the quarter was attributable to widespread growth across geographies and customers, and the delivery of systems on a large customer program.

 

GAAP operating income increased to $3.1 million, compared to the prior-year period operating loss of $0.2 million. Non-GAAP operating income increased by 208.4% to $4.9 million, or 13% of revenue, compared to the prior year period of $1.6 million, or 5.6% of revenue. Increased operating income was the result of increased revenue and higher operating leverage, partially offset by an unfavorable product mix, as more systems were sold during the period.

 

Ronen Samuel, Kornit Digital’s Chief Executive Officer commented, “We are pleased to report strong third quarter results, with sales increasing by more than 30% compared to last year quarter as the market success of our leading industrial DTG systems continues to modernize the retail supply chain. Our sales are accelerating as our customers respond to dynamic challenges to reduce printed apparel run length and lead times while minimizing inventory risk. We firmly believe that Kornit is uniquely positioned to address these evolving priorities with the right technology that delivers superior print quality and hand-feel to end consumers.”

 

 

“Our latest-generation HD products are receiving unprecedented market success, with more than 200 orders of systems and upgrades to date. The success of the HD leads another wave of Kornit innovation, as we are progressing well with customer beta testing of a new mass production system slated for broader availability in 2019, and the launch of our dark poly solution that was announced during our recent investor day. These technological enhancements add to our recent momentum and present a clear path to achieving our long-term goals.”

 

Third Quarter Results of Operations

 

Kornit reported third quarter revenues, net of the non-cash impact of warrants, of $37.6 million, compared with the prior-year period level of $28.4 million. The total non-cash impact of the warrants deducted from revenues was $1.7 million in the third quarter of 2018 and $0.1 million in the third quarter of 2017.

 

On a GAAP basis, third quarter gross profit was $18.9 million, compared with $14.6 million, in the prior-year period. Non-GAAP gross profit in the third quarter was $19.2 million, or 51.1% of revenues, compared with $14.8 million, or 52% of revenues in the third quarter of 2017. The lower gross margin was primarily due to the effect of warrants in the period.

 

On a GAAP basis, total operating expenses in the third quarter were $15.9 million, compared to $14.8 million in the corresponding prior-year period. Non-GAAP operating expenses in the third quarter increased to $14.3 million, or 38.1% of revenues, compared to $13.2 million, or 46.5% of revenues, in the corresponding prior-year period.

 

Third quarter GAAP research and development expenses were $5.1 million, compared to $5.8 million in the corresponding prior-year period. Third quarter non-GAAP research and development expenses were $4.8 million, or 12.8% of revenues, compared to $5.6 million, or 19.6% of revenues, in the prior-year period.

 

Third quarter GAAP selling and marketing expenses were $6.5 million, compared to $5.3 million in the corresponding prior-year period. Third quarter non-GAAP selling and marketing expenses were $5.9 million, or 15.7% of revenues, compared to $4.8 million, or 16.8% of revenues, in the equivalent prior-year period.

 

Third quarter GAAP general and administrative expenses were $4.2 million, compared to $3.4 million in the corresponding prior-year period. Third quarter non-GAAP general and administrative expenses were $3.6 million, or 9.6% of revenues, compared to $2.9 million, or 10.1% of revenues, in the corresponding prior-year period.

 

On a GAAP basis, third-quarter operating income was $3.1 million, compared to operating loss of $0.2 million during the corresponding prior-year period. Non-GAAP operating income in the third quarter increased to $4.9 million, compared to $1.6 million in the equivalent prior-year period. As a percent of revenues, non-GAAP operating margin for the third quarter was 13% of revenues, compared with 5.6% of revenues in the third quarter of 2017.

 

 

On a GAAP basis, the Company reported net income of $3.1 million, or $0.09 per diluted share, compared to net loss of $0.1 million in the third quarter of 2017. Non-GAAP net income for the third quarter of 2018 was $4.8 million, or $0.13 per diluted share, compared to non-GAAP net income of $1.5 million, or $0.04 per diluted share, in the corresponding prior year period.

 

Q3 Warrants impact:

 

		Three Months Ended
		September 30,
		2018								2017
		Net of Warrant Impact				Warrant Impact increase (decrease)				Net of Warrant Impact				Warrant Impact increase (decrease)
Revenues		$	37.6M			$	1.7M			$	28.4M			$	0.1M
Non-GAAP Gross Margin			51.1	%			206bps				52.0	%			25bps
Non-GAAP Operating Margin			13.0	%			367bps				5.6	%			49bps
Non-GAAP Net Margin			12.9	%			368bps				5.3	%			50bps
Non-GAAP Diluted Earnings Per Share		$	0.13			$	0.05			$	0.04			$	0.01

 

Balance Sheet and Cash Flow

 

At September 30, 2018, the Company had cash, deposits and marketable securities of $110.9 million, and no long-term debt. Cash flow provided by operations was $11 million during the third quarter of 2018, attributable mainly to higher net profit.

 

Fourth Quarter 2018 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.

 

Conference Call Information

 

The Company will host a conference call on Monday, November 12 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 1-800-239-9838 or +1-323-794-2551. The toll-free Israeli number is 1 80 921 2883. The confirmation code is 8753465.

 

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 8753465. The telephonic replay will be available beginning at 8:00 p.m. ET on Monday, November 12, 2018, and will last through 11:59 p.m. ET on Monday, November 26, 2018. 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, 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 and ink and consumables, the extent of our ability to leverage our global infrastructure build-out, the development of the market for digital textile printing, 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 filed with the U.S. Securities and Exchange Commission on March 30, 2018. 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, amortization of acquired intangible assets 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 STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

 

		Nine Months Ended								Three Months Ended
		September 30,								September 30,
		2018				2017				2018				2017
		(Unaudited)								(Unaudited)
Revenues
Products		$	92,207			$	75,734			$	33,357			$	25,328
Services			12,380				8,404				4,234				3,119
Total revenues			104,587				84,138				37,591				28,447
Cost of revenues
Products			39,274				34,646				14,042				10,571
Services			13,571				9,836				4,624				3,280
Total cost of revenues			52,845				44,482				18,666				13,851
Gross profit			51,742				39,656				18,925				14,596
Operating expenses:
Research and development			15,681				15,187				5,092				5,845
Selling and marketing			18,719				16,126				6,518				5,297
General and administrative			12,257				9,545				4,203				3,407
Restructuring expenses			321				339				55				246
Total operating			46,978				41,197				15,868				14,795
Operating income (loss)			4,764				(1,541	)			3,057				(199	)
Financial income, net			1,092				298				264				205
Income (loss) before taxes on income			5,856				(1,243	)			3,321				6
Taxes on income			404				403				208				130
Net income (loss)			5,452				(1,646	)			3,113				(124	)
Basic net income (loss) per share		$	0.16			$	(0.05	)		$	0.09			$	(0.00	)
Weighted average number of shares used in computing basic net income (loss) per share			34,372,064				34,445,168				34,513,629				34,883,772
Diluted net income (loss) per share		$	0.16			$	(0.05	)		$	0.09			$	(0.00	)
Weighted average number of shares used in computing diluted net income (loss) per share			35,151,714				34,445,168				35,673,298				34,883,772

 

 

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)

 

		Nine Months Ended September 30,								Three Months Ended September 30,
		2018				2017				2018				2017
		(Unaudited)								(Unaudited)
GAAP cost of revenues		$	52,845			$	44,482			$	18,666			$	13,851
Cost of product recorded for share-based compensation (1)			(340	)			(325	)			(151	)			(121	)
Cost of service recorded for share-based compensation (1)			(268	)			(147	)			(116	)			(64	)
Intangible assets amortization on cost of product (2)			(75	)			(75	)			(25	)			(25	)
Non-GAAP cost of revenues		$	52,162			$	43,935			$	18,374			$	13,641
GAAP gross profit		$	51,742			$	39,656			$	18,925			$	14,596
Gross profit adjustments			683				547				292				210
Non-GAAP gross profit		$	52,425			$	40,203			$	19,217			$	14,806
GAAP operating expenses		$	46,978			$	41,197			$	15,868			$	14,795
Share-based compensation (1)			(3,276	)			(2,721	)			(1,237	)			(1,060	)
Intangible assets amortization (2)			(723	)			(943	)			(241	)			(266	)
Restructuring expenses			(321	)			(339	)			(55	)			(246	)
Non-GAAP operating expenses		$	42,658			$	37,194			$	14,335			$	13,223
GAAP Taxes on income		$	404			$	403			$	208			$	130
Tax effect on to the above non-GAAP adjustments			286				443				105				137
Non-GAAP Taxes on income		$	690			$	846			$	313			$	267
GAAP net income (loss)		$	5,452			$	(1,646	)		$	3,113			$	(124	)
Share-based compensation (1)			3,884				3,193				1,504				1,245
Intangible assets amortization (2)			798				1,018				266				291
Restructuring expenses			321				339				55				246
Tax effect on to the above non-GAAP adjustments			(286	)			(443	)			(105	)			(137	)
Non-GAAP net income (*)		$	10,169			$	2,461			$	4,833			$	1,521
GAAP diluted earning (loss) per share		$	0.16			$	(0.05	)		$	0.09			$	(0.00	)
Non-GAAP diluted earning per share		$	0.29			$	0.07			$	0.13			$	0.04
Weighted average number of shares
Shares used in computing GAAP diluted net earning (loss) per share			35,151,714				34,445,168				35,673,298				34,883,772
Shares used in computing Non-GAAP diluted net earning per share			35,423,185				34,877,281				35,905,930				35,242,293
(1) Share-based compensation
Cost of product revenues			340				325				151				121
Cost of service revenues			268				147				116				64
Research and development			695				569				293				272
Selling and marketing			842				688				366				258
General and administrative			1,739				1,464				578				530
			3,884				3,193				1,504				1,245
(2) Intangible assets amortization
Cost of product revenues			75				75				25				25
Selling and marketing			723				943				241				266
			798				1,018				266				291

 

(*)	Non-GAAP net income has been updated from prior reports (a) to remove the adjustment for the non-cash impact of the warrants deducted from revenues, and (b) to reflect the tax effect of the non-GAAP adjustments.

 

 

KORNIT DIGITAL LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

		September 30,				December 31,
		2018				2017
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	14,099			$	18,629
Short-term bank deposit			9,500				4,500
Marketable securities			22,048				5,537
Trade receivables, net			30,620				23,245
Inventory			25,212				34,855
Other accounts receivable and prepaid expenses			4,750				2,661
Total current assets			106,229				89,427
LONG-TERM ASSETS:
Marketable securities			65,278				68,835
Deposits and prepaid expenses			712				627
Severance pay fund			377				523
Deferred tax asset			622				564
Property and equipment, net			14,023				11,230
Intangible assets, net			1,277				2,076
Goodwill			5,092				5,092
Total long-term assets			87,381				88,947
Total assets		$	193,610			$	178,374
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables		$	12,311			$	12,439
Employees and payroll accruals			6,844				6,338
Deferred revenues and advances from customers			1,960				1,697
Other payables and accrued expenses			5,283				5,046
Total current liabilities			26,398				25,520
LONG-TERM LIABILITIES:
Accrued severance pay			1,284				1,232
Payment obligation related to acquisition			-				334
Other long-term liabilities			744				589
Total long-term liabilities			2,028				2,155
SHAREHOLDERS’ EQUITY			165,184				150,699
Total liabilities and shareholders’ equity		$	193,610			$	178,374

 

 

 

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,
		2018				2017				2018				2017
		(Unaudited)								(Unaudited)
Cash flows from operating activities:
Net Income (loss)		$	5,452			$	(1,646	)		$	3,113			$	(124	)
Adjustments to reconcile net income (loss) to net cash provided by (used by) operating activities:
Depreciation and amortization			3,603				3,631				1,236				1,204
Fair value of warrants deducted from revenues			3,190				2,502				1,657				149
Share-based compensation			3,884				3,193				1,504				1,245
Amortization of premium on marketable securities			339				404				98				127
Realized gain on sale of marketable securities			-				(29	)			-				-
Decrease (increase)  in trade receivables			(7,584	)			(730	)			2,557				(3,624	)
Increase in other receivables and prepaid expenses			(2,109	)			(396	)			(1,587	)			(1,143	)
Decrease (increase) in inventory			8,919				(11,631	)			(125	)			(2,979	)
Increase (decrease) in deferred taxes, net			(25	)			(641	)			194				(458	)
Decrease (increase) in other long term assets			(88	)			(15	)			9				(209	)
Increase (decrease) in trade payables			(233	)			(1,538	)			1,959				522
Increase (decrease) in employees and payroll accruals			521				(194	)			(238	)			639
Increase (decrease) in deferred revenues and advances from customers			289				217				(123	)			909
Increase in other payables and accrued expenses			791				754				588				632
Increase in accrued severance pay, net			198				242				89				214
Increase (decrease) in other long term liabilities			155				501				(20	)			132
Loss from sale of property and Equipment			-				228				-				199
Foreign currency translation income (loss) on inter company balances with foreign subsidiaries			340				(798	)			47				(203	)
Net cash provided by (used in) operating activities			17,642				(5,946	)			10,958				(2,768	)
Cash flows from investing activities:
Purchase of property and equipment			(4,906	)			(4,500	)			(3,662	)			(1,069	)
Proceeds from sale of property and equipment			-				6				-				6
Investment in bank deposits			(5,000	)			-				(2,000	)			-
Proceeds from sale of marketable securities			-				38,312				-				-
Proceeds from maturity of marketable securities			3,354				6,740				1,204				-
Purchase of marketable securities			(16,680	)			(79,255	)			(10,550	)			(8,607	)
Net cash used in investing activities			(23,232	)			(38,697	)			(15,008	)			(9,670	)
Cash flows from financing activities:
Proceeds from secondary offering, net			-				35,077				-				-
Exercise of employee stock options			1,997				2,343				930				996
Payment of contingent consideration			(900	)			(1,400	)			-				-
Net cash provided by financing activities			1,097				36,020				930				996
Foreign currency translation adjustments on cash and cash equivalents			(37	)			124				(4	)			25
Decrease in cash and cash equivalents			(4,493	)			(8,623	)			(3,120	)			(11,442	)
Cash and cash equivalents at the beginning of the period			18,629				22,789				17,223				25,707
Cash and cash equivalents at the end of the period			14,099				14,290				14,099				14,290
Non-cash investing and financing activities:
Purchase of property and equipment on credit			539				142				539				142
Inventory transferred to be used as property and equipment			591				293				-				126