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Kornit Digital Reports Fourth Quarter and Full-Year 2020 Results

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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


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