EX-99.1 2 f6k021120ex99-1_kornitdi.htm PRESS RELEASE DATED FEBRUARY 11, 2020 ENTITLED "KORNIT DIGITAL REPORTS FOURTH QUARTER AND FULL-YEAR 2019 RESULTS"

Exhibit 99.1

 

 

Investor Contact:

Kelsey Turcotte

The Blueshirt Group

(917) 842-0334

Kelsey@blueshirtgroup.com

 

 

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 – February 11, 2020 – Kornit Digital Ltd. (NASDAQ: 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 

 

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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.

 

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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.

 

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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 (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.

   

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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 

 

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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

RECONCILATION 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)   (186)
Deferred taxes on income (benefit) (b)   (388)   (5,941)   419    (5,941)
Non-GAAP net income  $19,588   $13,122   $7,071   $2,953 
                     
GAAP diluted earning per share  $0.26   $0.35   $0.11   $0.19 
                     
Non-GAAP diluted earning per share  $0.49   $0.37   $0.17   $0.08 
                     
Weighted average number of shares                    
                     
Shares used in computing GAAP diluted net earning per share   39,500,305    35,363,704    42,210,359    35,986,581 
                     
Shares used in computing Non-GAAP diluted net earning per share   39,751,470    35,626,160    42,710,001    36,154,121 
                     
(1) Share-based compensation                    
Cost of product revenues   632    494    213    154 
Cost of service revenues   520    398    146    130 
Research and development   1,294    1,022    360    327 
Selling and marketing   1,689    1,240    557    398 
General and administrative   2,479    2,392    754    653 
    6,614    5,546    2,030    1,662 
(2) Acquisition related expenses                    
Cost of product revenues   28    -    -    - 
Selling and marketing   14    -    -    - 
General and administrative   277    -    234    - 
    319    -    234    - 
(3) Intangible assets amortization                    
Cost of product revenues   100    100    25    25 
Selling and marketing   757    964    225    241 
    857    1,064    250    266 

 

(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.
(c)Offering costs related to the secondary offering of the company’s shares.

 

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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, 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited) 
                 
Cash flows from operating activities:                
                 
Net income  $10,167   $12,429   $4,756   $6,977 
Adjustments to reconcile net income to net cash provided by operating activities:                    
Depreciation and amortization   4,441    4,965    1,082    1,362 
Fair value of warrants deducted from revenues   5,094    4,576    1,130    1,386 
Share-based compensation   6,614    5,546    2,030    1,662 
Amortization of premium (discount) on marketable securities   (112)   388    7    49 
Realized loss (gain) on sale of marketable securities   (271)   480    -    480 
Decrease (increase) in trade receivables   (18,617)   1,069    4,727    8,653 
Increase in other receivables and prepaid expenses   (1,204)   (3,135)   (1,609)   (1,026)
Decrease (increase) in inventory   (4,183)   4,037    (3,076)   (4,882)
Decrease in operating leases right-of-use assets   (571)   -    (623)   - 
Increase in deferred taxes, net   (1,885)   (6,665)   (1,253)   (6,640)
Decrease (increase) in other long term assets   386    (121)   182    (33)
Increase in trade payables   6,032    4,394    5,585    4,627 
Increase in operating lease liabilities   898    -    118    - 
Increase in employees and payroll accruals   1,423    1,621    239    1,100 
Increase (decrease) in deferred revenues and advances from customers   (921)   1,981    202    1,692 
Increase (decrease) in other payables and accrued expenses   3,588    548    1,934    (243)
Increase (decrease) in accrued severance pay, net   26    (1)   (20)   (199)
Increase (decrease) in other long term liabilities   (136)   867    (13)   712 
Loss from sale and disposal of property and Equipment   23    -    22    - 
Foreign currency translation income on inter company balances with foreign subsidiaries   212    389    (472)   49 
                     
Net cash provided by operating activities   11,004    33,368    14,948    15,726 
                     
Cash flows from investing activities:                    
                     
Purchase of property and equipment   (5,416)   (7,294)   (1,351)   (2,388)
Acquisition of intangible assets and capitalization of software development costs   (1,337)   -    (538)   - 
Proceeds from sale of property and equipment   3    -    -    - 
Cash paid in connection with acquisition   (4,715)   -    -    - 
Decrease (increase) in bank deposits   (90,000)   (500)   (1,000)   4,500 
Proceeds from sale of marketable securities   34,497    40,635    3,052    40,635 
Proceeds from maturity of marketable securities   3,000    6,564    1,500    3,210 
Purchase of marketable securities   (115,529)   (22,723)   (70,930)   (6,043)
                     
Net cash provided by (used in) investing activities   (179,497)   16,682    (69,267)   39,914 
                     
Cash flows from financing activities:                    
                     
Proceeds from secondary offering, net   129,710    -    -    - 
Exercise of employee stock options   5,901    6,425    501    4,428 
Payments related to shares withheld for taxes   (177)   -    (177)   - 
Payment of contingent consideration   (303)   (900)   -    - 
                     
Net cash provided by financing activities   135,131    5,525    324    4,428 
                     
Foreign currency translation adjustments on cash and cash equivalents   (27)   (72)   68    (35)
Increase (decrease) in cash and cash equivalents   (33,389)   55,503    (53,927)   60,033 
Cash and cash equivalents at the beginning of the period   74,132    18,629    94,670    14,099 
Cash and cash equivalents at the end of the period   40,743    74,132    40,743    74,132 
                     
Non-cash investing and financing activities:                    
                     
Purchase of property and equipment on credit   920    222    920    222 
Inventory transferred to be used as property and equipment   -    591    -    192 
Lease liabilities arising from obtaining right-of-use assets   9,640    -    8,307    - 

Capitalization of software development costs

   112    -    112    - 

 

 

9