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Kornit Digital Reports Fourth Quarter and Full-Year 2020 Results

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Kornit Digital Ltd
·19 min read
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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 Margin

51.8%

117bps

50.2%

113bps

Non-GAAP Operating Margin

16.3%

203bps

12.0%

200bps

Non-GAAP Net Margin

16.0%

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 Margin

46.7%

144bps

47.9%

144bps

Non-GAAP Operating Margin

2.7%

263bps

10.1%

248bps

Non-GAAP Net Margin

4.7%

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