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Kornit Digital Reports Fourth Quarter and Full-Year 2019 Results

Kornit Digital Reports Fourth Quarter and Full-Year 2019 Results

Record 2019 with 39% Year-Over-Year Growth in System Sales

  • Fourth quarter revenue of $48.7 million, net of $1.1 million attributed to the non-cash impact of warrants.
  • Fourth quarter 2019 GAAP operating income of $3.3 million; Non-GAAP operating income of $5.8 million, net of $1.1 million attributed to the non-cash impact of warrants.
  • Completed a year of innovative and successful new product introductions, continued to focus on strengthening infrastructure and expanding scale across the business, laying foundation for future growth.

ROSH-HA`AYIN, Israel, Feb. 11, 2020 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (KRNT), a leading provider of digital printing solutions for the global textile industry, today reported results for the fourth quarter and full-year, ended December 31, 2019.

“The fourth quarter of 2019 capped off another year of exciting growth and progress for Kornit. We are extremely proud of our strong performance in 2019 and believe that our leadership position in the market continues to widen,” said Ronen Samuel, Kornit Digital’s Chief Executive Officer. “Our 2019 results provide a robust foundation for continued growth and execution in 2020 as we are seeing the exceptionally strong momentum in the business continue in the first quarter. We believe Kornit is best positioned to lead the textile industry in its shift to on-demand manufacturing in a sustainable way.”

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

The Company will provide additional information in today's earning call, details of which can be found at the end of today's press release.

The following table compares the adverse, non-cash impact that our outstanding warrants had on our results of operations during the fourth quarters of 2019 and 2018, respectively:

  Fourth Quarter Warrants Impact
   
  Three Months Ended
  December 31,
  2019   2018
  Net of
Warrants
Impact
  Warrants
Impact
  Net of
Warrants
Impact
  Warrants
Impact
               
Revenue $48.7M   $1.1M   $37.8M   $1.4M
Non-GAAP Gross Margin 50.2%   113bps   48.8%   181bps
Non-GAAP Operating Margin 12.0%   200bps   7.8%   326bps
Non-GAAP Net Margin 14.5%   194bps   7.8%   326bps
Non-GAAP Diluted Earnings Per Share $0.17
  $0.02   $0.08
  $0.04
               

The following table compares the adverse, non-cash impact that our outstanding warrants had on our results of operations during the full-year 2019 and 2018, respectively:

  Full-Year Warrants Impact
   
  Year Ended
  December 31,
  2019   2018
  Net of
Warrants
Impact
  Warrants
Impact
  Net of
Warrants
Impact
  Warrants
Impact
               
Revenue $179.9M   $5.1M   $142.4M   $4.6M
Non-GAAP Gross Margin 47.9%   144bps   49.8%   156bps
Non-GAAP Operating Margin 10.1%   248bps   8.9%   284bps
Non-GAAP Net Margin 10.9%   245bps   9.2%   283bps
Non-GAAP Diluted Earnings Per Share $0.49   $0.13   $0.37   $0.13
               

Guy Avidan, Kornit Digital’s Chief Financial Officer, said, “We had a strong close to 2019 as we saw significant business expansion with strategic accounts and collaborative business development activities with leading brands resulting in new customer accounts in both the athleisure and specialty retail categories. There is a significant market opportunity ahead of us and we continue to invest in the business through expansion of our go-to-market capabilities, enhancements to our global leadership team, and allocation of incremental capital to drive innovation that will propel Kornit towards our long-term goal of reaching $500 million in run-rate sales exiting 2023.”

Fourth Quarter 2019 Results of Operations

  • Total revenue for the fourth quarter 2019 revenue grew 28.8% to $48.7 million, net of $1.1 million attributed to the non-cash impact of warrants, compared to $37.8 million, net of $1.4 million attributed to the non-cash impact of warrants in the prior year period.
  • GAAP net income for the fourth quarter 2019 was $4.8 million, or $0.11 per diluted share, compared to net income of $7.0 million, or $0.19 per diluted share, for the fourth quarter 2018.
  • Non-GAAP net income for the fourth quarter 2019 was $7.1 million, or $0.17 per diluted share, net of $0.02 per diluted share attributed to the non-cash impact of warrants, compared to $3.0 million, or $0.08 per diluted share, net of $0.04 per diluted share attributed to the non-cash impact of warrants, for the fourth quarter 2018.

Full-Year 2019 Results of Operations

  • Total revenue for the full-year 2019 revenue was $179.9 million, net of $5.1 million attributed to the non-cash impact of warrants, compared to $142.4 million, net of $4.6 million attributed to the non-cash impact of warrants in the prior year period.
  • GAAP net income for the full-year 2019 was $10.2 million, or $0.26 per diluted share, compared to net income of $12.4 million, or $0.35 per diluted share, for the full-year 2018.
  • Non-GAAP net income for the full-year 2019 was $19.6 million, or $0.49 per diluted share, net of $0.13 per diluted share attributed to the non-cash impact of warrants, compared to $13.1 million, or $0.37 per diluted share, net of $0.13 per diluted share attributed to the non-cash impact of warrants, for the full-year 2018.

First Quarter 2020 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.

Conference Call Information

The Company will host a conference call today 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 1-800-289-0438 or +1-323-794-2423. The toll-free Israeli number is 1 809 212 883. The confirmation code is 1770690.

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 1770690. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, February 11, 2020, and will last through 11:59 p.m. ET on Tuesday, February 25, 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 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 the Company's Annual Report on Form 20-F for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission on March 26, 2019. 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, offering costs, excess cost of acquired inventory, foreign exchange differences associated with ASC 842, amortization of acquired intangible assets, deferred tax impact 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 (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 BALANCE SHEETS
(U.S. dollars in thousands)
    December 31,   December 31,
    2019   2018
    (Unaudited)    
ASSETS            
CURRENT ASSETS:            
Cash and cash equivalents   $ 40,743   $ 74,132
Short-term bank deposit     95,000     5,000
Marketable securities     32,567     3,981
Trade receivables, net     40,510     21,953
Inventory     37,477     30,030
Other accounts receivable and prepaid expenses     6,985     5,660
Total current assets     253,282     140,756
             
LONG-TERM ASSETS:            
Marketable securities     95,393     44,603
Deposits and prepaid expenses     356     744
Severance pay fund     301     351
Deferred taxes     9,661     7,272
Property,plant and equipment, net     17,489     14,994
Operating lease right-of-use assets     22,806     -
Intangible assets, net     2,494     1,011
Goodwill     5,564     5,092
Total long-term assets     154,064     74,067
             
Total assets   $ 407,346   $ 214,823
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES:            
Trade payables   $ 23,449   $ 16,614
Employees and payroll accruals     9,165     7,932
Deferred revenues and advances from customers     2,688     3,633
Operating lease liabilities     3,902     -
Other payables and accrued expenses     8,253     4,993
Total current liabilities     47,457     33,172
             
LONG-TERM LIABILITIES:            
Accrued severance pay     1,035     1,059
Operating lease liabilities     19,231     -
Other long-term liabilities     1,320     1,456
Total long-term liabilities     21,586     2,515
             
SHAREHOLDERS' EQUITY     338,303     179,136
             
Total liabilities and shareholders' equity   $ 407,346   $ 214,823
         


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,
    2019     2018       2019     2018  
  (Unaudited)       (Unaudited)
               
Revenues              
Products $ 156,594   $ 125,729     $ 42,247   $ 33,522  
Services   23,272     16,644       6,403     4,264  
Total revenues   179,866     142,373       48,650     37,786  
               
Cost of revenues              
Products   71,057     53,303       17,746     14,029  
Services   26,733     19,201       6,870     5,630  
Total cost of revenues   97,790     72,504       24,616     19,659  
               
Gross profit   82,076     69,869       24,034     18,127  
               
Operating expenses:              
Research and development   22,407     21,912       6,021     6,231  
Selling and marketing   33,573     25,596       9,251     6,877  
General and administrative   18,498     16,436       5,454     4,179  
Restructuring expenses   -     321       -     -  
Total operating   74,478     64,265       20,726     17,287  
Operating income   7,598     5,604       3,308     840  
Financial income, net   3,313     1,433       2,186     341  
Income before taxes on income   10,911     7,037       5,494     1,181  
               
Taxes on income (benefit)   744     (5,392 )     738     (5,796 )
Net income   10,167     12,429       4,756     6,977  
               
Basic net income per share $ 0.27   $ 0.36     $ 0.12   $ 0.20  
               
Weighted average number of shares              
used in computing basic net              
income per share   38,079,394     34,521,352       40,655,404     34,956,121  
               
               
Diluted net income per share $ 0.26   $ 0.35     $ 0.11   $ 0.19  
               
Weighted average number of shares              
used in computing diluted              
net income per share   39,500,305     35,363,704       42,210,359     35,986,581  
               


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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,
  `   2019       2018         2019       2018  
    (Unaudited)       (Unaudited)
                                   
GAAP cost of revenues $ 97,790     $ 72,504       $ 24,616     $ 19,659  
Cost of product recorded for share-based compensation (1)   (632 )     (494 )       (213 )     (154 )
Cost of service recorded for share-based compensation (1)   (520 )     (398 )       (146 )     (130 )
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 )     -         -       -  
Non-GAAP cost of revenues $ 93,720     $ 71,512       $ 24,232     $ 19,350  
                                   
GAAP gross profit $ 82,076     $ 69,869       $ 24,034     $ 18,127  
Gross profit adjustments   4,070       992         384       309  
Non-GAAP gross profit $ 86,146     $ 70,861       $ 24,418     $ 18,436  
                                   
GAAP operating expenses $ 74,478     $ 64,265       $ 20,726     $ 17,287  
Share-based compensation (1)   (5,462 )     (4,654 )       (1,671 )     (1,378 )
Acquisition related expenses (2)   (291 )     -         (234 )     -  
Intangible assets amortization (3)   (757 )     (964 )       (225 )     (241 )
Offering costs (c)   -       (175 )       -       (175 )
Restructuring expenses   -       (321 )       -       -  
Non-GAAP operating expenses $ 67,968     $ 58,151       $ 18,596     $ 15,493  
                                   
GAAP Financial income $ 3,313     $ 1,433       $ 2,186     $ 341  
Foreign exchange losses associated with ASC 842   250       -         (530 )     -  
Non-GAAP Financial income $ 3,563     $ 1,433       $ 1,656     $ 341  
                                   
GAAP Taxes on income (benefit) $ 744     $ (5,392 )     $ 738     $ (5,796 )
Tax effect on to the above non-GAAP adjustments   1,021       472         88       186  
Tax benefit (b)   388       5,941         (419 )     5,941  
Non-GAAP Taxes on income $ 2,153     $ 1,021       $ 407     $ 331  
                                   
GAAP net income $ 10,167     $ 12,429       $ 4,756     $ 6,977  
Share-based compensation (1)   6,614       5,546         2,030       1,662  
Acquisition related expenses (2)   319       -         234       -  
Intangible assets amortization (3)   857       1,064         250       266  
Offering costs (c)   -       175         -       175  
Excess cost of product on acquired inventory (a)   2,790       -         -       -  
Restructuring expenses   -       321         -       -  
Foreign exchange losses associated with ASC 842   250       -         (530 )     -  
Tax effect on to the above non-GAAP adjustments   (1,021 )     (472 )       (88 )