EX-99.1 2 ea125371ex99-1_kornitdigi.htm PRESS RELEASE, DATED AUGUST 11, 2020, TITLED "KORNIT DIGITAL REPORTS SECOND QUARTER 2020 RESULTS"

Exhibit 99.1

 

Investor Contact:

Kelsey Turcotte

The Blueshirt Group

(917) 842-0334

Kelsey@blueshirtgroup.com

 

 

Kornit Digital Reports Second Quarter 2020 Results

 

Announces Acquisition of Custom Gateway, a leading global provider of cloud software workflow solutions enabling on-demand apparel and home décor production

 

●Second quarter revenue of $37.4 million, net of non-cash warrants impact of $0.8 million
●Second quarter GAAP operating loss of $5.3 million; Non-GAAP operating loss of $2.5 million, including $0.8 million attributed to the non-cash impact of warrants
●Inflection in online channels, acceleration of digital transformation in textile industry drives strong performance in North America
●Robust pipeline and strong momentum
●Combination of Custom Gateway’s software workflow portfolio with Kornit’s existing technologies will bring to the market a unique, end-to-end solution for on-demand textile production.

 

Rosh-Ha’Ayin, Israel – August 11, 2020 – Kornit Digital Ltd. (NASDAQ: KRNT), a leading provider of digital printing solutions for the global textile industry, today reported results for the second quarter ended June 30, 2020.

 

“We are very pleased to see strong momentum in the business as customers reopened sites in April and reengaged in big projects in response to significant demand, particularly in online channels. Looking ahead, we believe that we are at one of the most exciting times in our Company’s history, as the mega trends in our industry have accelerated the transition to digital textile production where we are in a unique position to benefit,” said Ronen Samuel, Kornit Digital’s CEO. “For Kornit, we believe this inflection point will drive a V-shaped recovery in the business as we help brands and strategic partners quickly adopt agile, digital, and sustainable on-demand textile manufacturing.”

 

Samuel continued, “We are also very excited to announce the acquisition of Custom Gateway, a leading provider of cloud software workflow solutions. This highly strategic acquisition accelerates our organic development effort and, when combined with Kornit’s technologies, will bring to the market a unique offering for end-to-end management of sustainable on-demand textile production. This combination further extends our market leadership.”

 

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

 

 

 

 

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

 

Second Quarter Warrants Impact

 

   Three Months Ended 
   June 30, 
   2020   2019 
   Net of
Warrants
Impact		   Warrants
Impact		   Net of
Warrants
Impact		   Warrants
Impact		 
                 
Revenue  $37.4M  $0.8M  $45.3M  $1.0M
Non-GAAP Gross Margin   44.1%   123bps   47.7%   110bps
Non-GAAP Operating Margin   (6.8)%   235bps   9.2%   191bps
Non-GAAP Net Margin   (3.6)%   228bps   9.5%   190bps
Non-GAAP Diluted Earnings (Loss) Per Share  $(0.03)  $0.02   $0.11   $0.03 

 

“We are very excited by the huge opportunity we see in the market that has resulted in an unprecedented pipeline and very good visibility. The team is highly engaged with new customers as well as strategic partners’ system implementations that will not only drive system revenue over the coming quarters but will also create long-term demand for ink and services,” said Guy Avidan, Kornit Digital’s Chief Financial Officer. “As we head into the back of 2020, we are focused on a strong finish to the year and committed to profitability for fiscal 2020.”

 

Second Quarter 2020 Results of Operations

 

●Total revenue for the second quarter of 2020 was $37.4 million, net of $0.8 million attributed to the non-cash impact of warrants, compared to $45.3 million, net of $1.0 million attributed to the non-cash impact of warrants in the prior year period.
●GAAP net loss for the second quarter of 2020 was $4.6 million, or $0.11 per diluted share, compared to net income of $1.9 million, or $0.05 per diluted share, for the second quarter of 2019.
●Non-GAAP net loss for the second quarter 2020 was $1.3 million, or $0.03 per diluted share, including $0.02 per diluted share attributed to the non-cash impact of warrants, compared to non-GAAP net income of $4.3 million, or $0.11 per diluted share, net of $0.03 per diluted share attributed to the non-cash impact of warrants, for the second quarter of 2019.

 

Third Quarter 2020 Guidance

 

The Company will discuss its expectations for the third quarter and the balance of 2020 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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Second 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 13707102.

 

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 13707102. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, August 11, 2020, until 11:59 p.m. ET on Tuesday, August 25, 2020. The call will also be available for replay via the webcast link on Kornit’s Investor Relations website.

 

Upcoming Fireside Chat to Discuss Custom Gateway Acquisition

 

The Company will host a virtual fireside chat for investors on Tuesday, August 18, 2020 at 10:30 a.m. ET to discuss the acquisition of Custom Gateway and the related market opportunity. Dial-in details and webcast information will be available on the investor relations section of Kornit’s 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 extensive, may continue to impact, in a material adverse manner, our operations, financial position and cash flows, and those of our customers and suppliers; the degree of our success in developing, introducing and selling new or improved products and product enhancements including specifically our Poly Pro and Presto products the extent of our ability to consummate sales to large accounts with multi-system delivery plans, the degree of our ability to fill orders for our systems, the extent of our ability to continue to increase sales of our systems, ink and consumables, the extent of our ability to leverage our global infrastructure build-out, the development of the market for digital textile printing, the availability of alternative ink, competition, sales concentration, changes to our relationships with suppliers, the extent of our success in marketing, and those additional factors referred to under “Risk Factors” in Item 3.D of the Company’s Annual Report on Form 20-F for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission on March 23, 2020. Any forward-looking statements in this press release are made as of the date hereof, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

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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, 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 (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.

 

About Custom Gateway

 

For more information on Custom Gateway, please visit Custom Gateway’s website.

 

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KORNIT DIGITAL LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

   June 30,   December 31, 
   2020   2019 
   (Unaudited)     
ASSETS        
CURRENT ASSETS:          
Cash and cash equivalents  $47,448   $40,743 
Short-term bank deposit   79,804    95,000 
Marketable securities   36,453    32,567 
Trade receivables, net   39,803    40,510 
Inventory   42,126    37,477 
Other accounts receivable and prepaid expenses   7,910    6,985 
Total current assets   253,544    253,282 
           
LONG-TERM ASSETS:          
Marketable securities   73,687    95,393 
Deposits and prepaid expenses   438    356 
Severance pay fund   295    301 
Deferred taxes   9,025    7,781 
Property,plant and equipment, net   24,182    17,489 
Operating lease right-of-use assets   22,859    22,806 
Intangible assets, net   2,132    2,494 
Goodwill   5,564    5,564 
Total long-term assets   138,182    152,184 
           
Total assets  $391,726   $405,466 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Trade payables  $13,021   $23,449 
Employees and payroll accruals   9,435    9,165 
Deferred revenues and advances from customers   2,579    2,688 
Operating lease liabilities   4,061    3,902 
Other payables and accrued expenses   6,796    6,373 
Total current liabilities   35,892    45,577 
           
LONG-TERM LIABILITIES:          
Accrued severance pay   1,092    1,035 
Operating lease liabilities   19,076    19,231 
Other long-term liabilities   1,177    1,320 
Total long-term liabilities   21,345    21,586 
           
SHAREHOLDERS’ EQUITY   334,489    338,303 
           
Total liabilities and shareholders’ equity  $391,726   $405,466 

 

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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)

 

   Six Months Ended   Three Months Ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
   (Unaudited)   (Unaudited) 
                 
Revenues                    
Products  $54,246   $71,030   $31,859   $38,786 
Services   9,402    12,893    5,577    6,547 
Total revenues   63,648    83,923    37,436    45,333 
                     
Cost of revenues                    
Products   27,086    34,209    14,930    17,787 
Services   12,736    13,891    6,708    7,450 
Total cost of revenues   39,822    48,100    21,638    25,237 
                     
Gross profit   23,826    35,823    15,798    20,096 
                     
Operating expenses:                    
Research and development   13,524    10,776    7,041    5,309 
Selling and marketing   16,788    16,473    8,291    9,205 
General and administrative   11,864    8,356    5,794    4,313 
Total operating expenses   42,176    35,605    21,126    18,827 
Operating income (loss)   (18,350)   218    (5,328)   1,269 
Financial income, net   2,797    545    592    549 
Income (loss) before taxes on income   (15,553)   763    (4,736)   1,818 
                     
Taxes on income (Tax benefit)   (927)   20    (164)   (85)
Net income (loss)   (14,626)   743    (4,572)   1,903 
                     
Basic earnings (losses) per share  $(0.36)  $0.02   $(0.11)  $0.05 
                     
Weighted average number of shares used in computing basic earnings (losses) per share   40,817,593    35,547,223    40,872,497    35,962,455 
                     
Diluted earnings (losses) per share  $(0.36)  $0.02   $(0.11)  $0.05 
                     
Weighted average number of shares used in computing diluted earnings (losses) per share   40,817,593    36,767,656    40,872,497    37,287,748 

 

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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)

 

   Six Months Ended   Three Months Ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
   (Unaudited)   (Unaudited) 
                     
GAAP cost of revenues  $39,822   $48,100   $21,638   $25,237 
Cost of product recorded for share-based compensation (1)   (491)   (237)   (277)   (129)
Cost of service recorded for share-based compensation (1)   (360)   (230)   (210)   (116)
Intangible assets amortization on cost of product (3)   (50)   (50)   (25)   (25)
Excess cost of product on acquired inventory (a)   -    (2,790)   -    (1,236)
Acquisition related expenses (2)   -    (28)   -    - 
COVID-19 one time impact (4)   (446)   -    (202)   - 
Non-GAAP cost of revenues  $38,475   $44,765   $20,924   $23,731 
                     
GAAP gross profit  $23,826   $35,823   $15,798   $20,096 
Gross profit adjustments   1,347    3,335    714    1,506 
Non-GAAP gross profit  $25,173   $39,158   $16,512   $21,602 
                     
GAAP operating expenses  $42,176   $35,605   $21,126   $18,827 
Share-based compensation (1)   (3,779)   (2,276)   (2,035)   (1,198)
Acquisition related expenses (2)   -    (57)   -    - 
Intangible assets amortization (3)   (251)   (308)   (116)   (179)
COVID-19 one time impact (4)   69    -    80    - 
Non-GAAP operating expenses  $38,215   $32,964   $19,055   $17,450 
                     
GAAP Financial income  $2,797   $545   $592   $549 
Foreign exchange losses associated with ASC 842   (82)   538    528    203 
Non-GAAP Financial income  $2,715   $1,083   $1,120   $752 
                     
GAAP Taxes on income (Tax benefit)  $(927)  $20   $(164)  $(85)
Tax effect on to the above non-GAAP adjustments   (180)   871    (98)   382 
Tax benefit (b)   1,015    460    169    295 
Non-GAAP Taxes on income (Tax benefit)  $(92)  $1,351   $(93)  $592 
                     
GAAP net income (loss)  $(14,626)  $743   $(4,572)  $1,903 
Share-based compensation (1)   4,630    2,743    2,522    1,443 
Acquisition related expenses (2)   -    85    -    - 
Intangible assets amortization (3)   301    358    141    204 
COVID-19 one time impact (4)   377    -    122    - 
Excess cost of product on acquired inventory (a)   -    2,790    -    1,236 
Foreign exchange losses associated with ASC 842   (82)   538    528    203 
Tax effect on to the above non-GAAP adjustments   180    (871)   98    (382)
Deferred taxes on income (Tax benefit) (b)   (1,015)   (460)   (169)   (295)
Non-GAAP net income (loss)  $(10,235)  $5,926   $(1,330)  $4,312 
                     
GAAP diluted earnings (losses) per share  $(0.36)  $0.02   $(0.11)  $0.05 
                     
Non-GAAP diluted earnings (losses) per share  $(0.25)  $0.16   $(0.03)  $0.11 
                     
Weighted average number of shares                    
                     
Shares used in computing GAAP diluted net earnings (losses) per share   40,817,593    36,767,656    40,872,497    37,287,748 
                     
Shares used in computing Non-GAAP diluted net earnings (losses) per share   40,817,593    36,976,062    40,872,497    37,532,617 
                     
(1) Share-based compensation                    
Cost of product revenues   491    237    277    129 
Cost of service revenues   360    230    210    116 
Research and development   780    600    436    345 
Selling and marketing   1,381    636    740    321 
General and administrative   1,618    1,040    859    532 
    4,630    2,743    2,522    1,443 
(2) Acquisition related expenses                    
Cost of product revenues   -    28    -    - 
Selling and marketing   -    14    -    - 
General and administrative   -    43    -    - 
    -    85    -    - 
(3) Intangible assets amortization                    
Cost of product revenues   50    50    25    25 
Selling and marketing   251    308    116    179 
    301    358    141    204 
                     
(4) COVID-19 one time impact                    
Cost of product revenues   453    -    209    - 
Cost of service revenues   (7)   -    (7)   - 
Research and development   (57)   -    (57)   - 
Selling and marketing   (1)   -    (12)   - 
General and administrative   (11)   -    (11)   - 
    377    -    122    - 

 

(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.

 

7

 

 

KORNIT DIGITAL LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

   Six Months Ended   Three Months Ended 
   June 30,   June 30, 
   2020   2019   2020   2019 
   (Unaudited)   (Unaudited) 
                 
Cash flows from operating activities:                
                     
Net income (loss)  $(14,626)  $743   $(4,572)  $1,903 
Adjustments to reconcile net income to net cash provided by operating activities:                    
Depreciation and amortization   2,196    2,222    1,095    1,141 
Fair value of warrants deducted from revenues   1,406    1,534    841    974 
Share-based compensation   4,630    2,743    2,522    1,443 
Amortization of discount on marketable securities   165    (84)   76    (50)
Realized gain on sale of marketable securities   (102)   (271)   -    (271)
Decrease (increase) in trade receivables   616    (12,163)   (6,769)   (8,022)
Decrease (increase) in other receivables and prepaid expenses   (844)   750    135    (532)
Decrease (increase) in inventory   (5,205)   (1,525)   4,298    78 
Decrease (increase) in operating leases right-of-use assets   33    34    (30)   10 
Decrease (increase) in deferred taxes, net   (1,384)   (646)   (278)   (460)
Decrease (increase) in other long term assets   (82)   204    (87)   (6)
Increase (decrease) in trade payables   (9,891)   3,782    (8,387)   1,114 
Increase (decrease) in operating lease liabilities   (82)   538    527    203 
Increase (decrease) in employees and payroll accruals   335    (783)   688    (1,909)
Decrease in deferred revenues and advances from customers   (107)   (1,774)   (12)   (453)
Increase in other payables and accrued expenses   432    952    792    605 
Increase in accrued severance pay, net   63    7    92    44 
Decrease in other long term liabilities   (143)   (210)   (13)   (12)
Loss from sale and disposal of property and Equipment   75    -    -    - 
Foreign currency translation income (loss) on inter company balances with foreign subsidiaries   183    11    (127)   (182)
                     
Net cash used in operating activities   (22,332)   (3,936)   (9,209)   (4,382)
                     
Cash flows from investing activities:                    
                     
Purchase of property and equipment   (8,511)   (1,964)   (4,936)   (1,310)
Acquisition of intangible assets and capitalization of software development costs   (121)   (650)   (40)   (650)
Proceeds from sale of property and equipment   4    -    -    - 
Cash paid in connection with acquisition   -    (4,715)   -    - 
Decrease (increase) in bank deposits   15,196    (77,000)   1,346    (68,000)
Proceeds from sale of marketable securities   20,802    30,445    -    29,807 
Proceeds from maturity of marketable securities   17,445    500    5,343    - 
Purchase of marketable securities   (18,542)   (44,599)   (9,801)   - 
                     
Net cash provided by (used in) investing activities   26,273    (97,983)   (8,088)   (40,153)
                     
Cash flows from financing activities:                    
                     
Proceeds from secondary offering, net   -    130,379    -    130,379 
Exercise of employee stock options   2,804    2,269    1,236    1,125 
Payments related to shares withheld for taxes   (64)   -    (11)   - 
Payment of contingent consideration   -    (303)   -    - 
                     
Net cash provided by financing activities   2,740    132,345    1,225    131,504 
                     
Foreign currency translation adjustments on cash and cash equivalents   24    (8)   43    22 
Increase (decrease) in cash and cash equivalents   6,705    30,418    (16,029)   86,991 
Cash and cash equivalents at the beginning of the period   40,743    74,132    63,477    17,559 
Cash and cash equivalents at the end of the period   47,448    104,550    47,448    104,550 
                     
Non-cash investing and financing activities:                    
                     
Purchase of property and equipment on credit   384    658    384    658 
Inventory transferred to be used as property and equipment   511    -    214    - 
Property and equipment transferred to be used as inventory   51    -    -    - 
Issuance expenses on credit   -    648    -    648 
Receipt on account of shares   13    811    13    811 
Lease liabilities arising from obtaining right-of-use assets   2,187    -    267    - 
Capitalization of software development costs   -    87    -    87 

 

 

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