Kornit Digital Reports 2016 Second Quarter Results

Highlights

  • Second quarter 2016 revenues of $24.0 million, an increase of 12.6% over the prior-year period.
  • Second quarter GAAP net loss of $0.1 million, or net loss of less than $0.01 per diluted share.
  • Second quarter non-GAAP net income of $0.7 million, or $0.02 per diluted share.
  • GAAP gross margin of 48.8%, an increase of 172 basis points over the prior year.
  • Non-GAAP gross margin of 49.5%, an increase of 187 basis points over the prior year.
  • Completed the acquisition of SPSI’s digital printing assets.

ROSH-HA`AYIN, Israel, Aug. 02, 2016 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (NASDAQ:KRNT), a leading provider of digital printing solutions for the global printed textile industry, today reported results for the second quarter ended June 30, 2016.

Revenues for the second quarter of 2016 increased 12.6% to $24.0 million, compared to the prior year period of $21.3 million. Higher sales were attributable to growth throughout the company’s product offerings, including systems sold and ink.

The Company reported a GAAP net loss of $0.1 million, or $0.00 per diluted share, compared to net earnings of $0.7 million, in the second quarter of 2015. On a non-GAAP basis, net income in the second quarter of 2016 was $0.7million, or $0.02 per diluted share, compared to prior-year net income of $2.4 million.

During the quarter, the Company had several notable business updates. In July 1, 2016 Kornit acquired the digital direct-to-garment printing assets of SPSI, Inc., one its North American distributors in an effort to improve market reach and deepen relationships with multiple large accounts. The company also announced the hiring of Dr. Nuriel Amir, Ph.D., Chief Technology Officer and Gilad Yron, Executive Vice President of Global Business. Additionally, the Company attended two trade shows during the second quarter, resulting in new orders and a number of potential new customers.

Gabi Seligsohn, Kornit Digital’s Chief Executive Officer commented, “We are pleased with the ongoing growth we have seen in the first half of 2016. We are continuing to ramp up our large, undisclosed customer and are seeing a significant increase in sales with multiple large accounts within the United States which we expect to continue well into the second half of the year.”

Seligsohn continued, “We are committed to maintaining strong rates of growth and to building a highly capable operating infrastructure. To that end, the very successful onboard of both Gilad, as head of global business, and Nuriel, as our CTO, will allow us to combine deeper customer and partner relationships with an exciting long term product roadmap. We are also very pleased with the process of integrating SPSI’s business with our North American operation. As previously communicated, we will continue to layer on operating expenses in several parts of the organization during the balance of the year to develop a stronger platform. Adoption of our systems and product offerings is continuing to increase throughout the marketplace and these investments position us to capture an acceleration of growth in the second half of 2016. Over time, we believe these investments will drive the benefits of scale and ensure a strong level of execution for our customers.”

Second Quarter 2016 Results of Operations
In the second quarter of 2016, Kornit reported revenues of $24.0 million, an increase of 12.6% compared with the prior-year level of $21.3 million. Higher sales were the result of higher volume of systems sold and ink.

GAAP second quarter gross profit was $11.7 million, compared with $10.0 million, in the prior-year. On a Non-GAAP basis gross profit in the second quarter was $11.9 million, or 49.5% of sales, compared with $10.1 million, or 47.6% of sales in the prior-year. Higher gross margins primarily reflected a favorable sales mix of high throughput systems, and an increased contribution from ink and consumables during the current period.

GAAP total operating expenses in the second quarter were $11.6 million, compared to $8.9 million in the prior period. On a Non-GAAP basis operating expenses in the second quarter increased to $10.9 million, or 45.4% of sales, compared to $7.4 million, or 34.7% of sales in the prior year. The increase in total operating expenses was consistent with the investment strategy previously discussed, and increased headcount in our research and development department.

Second quarter GAAP research and development expenses were $4.1 million, compared to the prior-year period of $2.7 million. Second quarter non-GAAP research and development expenses were $4.0 million, or 16.8% of sales, compared to $2.5 million, or 11.9% of sales in the prior-year. We expect to have elevated research and development costs for the balance of the year.

GAAP second quarter operating income was $0.1 million, compared to the prior year period profit of $1.1 million. Non-GAAP operating income in the second quarter decreased to $1.0 million, compared to $2.7 million in the prior year. As a percent of sales, Non-GAAP operating margin for the second quarter was 4.0% of sales, compared with 12.9% of sales in the prior year period.

The company reported second quarter GAAP net loss of $0.1 million, or net loss of $0.00 per diluted share, compared to net income of $0.7 million in the second quarter of 2015. On a Non-GAAP basis, net income for the second quarter of 2016 were $0.7 million, or $0.02 per diluted share, compared to $2.4 million in the prior year period.

Balance Sheet and Cash Flow
At June 30, 2016, the Company had cash and cash equivalents, bank deposits and marketable securities of $66.2 million, and no long-term debt. Cash flow used in operation activity for the first half of 2016 were $6.8 million, primarily due to the increase of inventories and accounts receivables.

Third Quarter 2016 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.

Conference Call Information
Gabi Seligsohn, the Company’s Chief Executive Officer, and Guy Avidan, the Company’s Chief Financial Officer, will host a conference call on the same day 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 1-877-419-6600 or +1-719-325-4750 (international). The toll-free Israeli number is 1 80 925 8243. The confirmation code is 8140279.

To listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or +1-858-384-5517 (international) and enter confirmation code 8140279. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, August 2, 2016, and will last through 11:59 p.m. ET August 16, 2016. 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: our success in developing, introducing and selling new or improved products and product enhancements, our ability to consummate sales to large accounts with multi-system delivery plans, such as our Storm Hexa, our ability to leverage our global infrastructure build-out, the development of the market for digital textile printing, availability of alternative ink, competition, sales concentration, changes to our relationships with suppliers, our success in marketing, and those factors referred to under "Risk Factors" in the company's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on March 17, 2016. 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 acquisition related expenses, share-based compensation expenses and amortization of acquired intangible assets. The purpose of such adjustments is to give 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 develops, designs and markets innovative digital printing solutions for the global printed textile industry. Kornit’s solution includes its proprietary digital printing systems, ink and other consumables, associated software and value added services. Kornit’s vision is to revolutionize the textile industry by facilitating the transition from analog processes that have not evolved for decades to digital methods of production that address contemporary supply, demand and environmental dynamics. Kornit is a global company headquartered in Rosh-Ha`Ayin, Israel, with U.S. offices in Mequon, Wisconsin and additional sales, support and marketing offices in Germany and Hong Kong.

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,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Revenues$45,787 $38,876 $23,952 $21,266
Cost of revenues 23,625 20,923 12,260 11,251
Gross profit 22,162 17,953 11,692 10,015
Operating expenses:
Research and development 7,896 5,506 4,141 2,655
Selling and marketing 8,772 5,911 4,320 3,256
General and administrative 5,528 5,185 3,106 3,030
Total operating expenses 22,196 16,602 11,567 8,941
Operating income (loss) (34) 1,351 125 1,074
Financial income (expenses), net 96 (449) (18) (192)
Income before taxes on income 62 902 107 882
Taxes on income 415 385 234 164
Net income (loss) (353) 517 (127) 718
Basic net income (loss) per share$(0.01) $0.03 $(0.00) $0.02
Weighted average number of shares
used in computing basic and diluted
net loss per share 30,420,165 19,370,095 30,474,543 29,766,965
Diluted net income (loss) per share$(0.01) $0.02 $(0.00) $0.02
Weighted average number of shares
used in computing diluted
net income (loss) per share 30,420,165 21,268,193 30,474,543 31,778,725

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,
2016 2015 2016 2015
(Unaudited) (Unaudited)
GAAP net income (loss) as reported$(353) $517 $(127) $718
Non-GAAP adjustments
Expenses recorded for share-based compensation
Cost of revenues 206 112 103 53
Research and development 156 124 69 68
Selling and marketing 332 164 179 80
General and administrative 768 575 385 334
Acquisition related expenses
Research and development 100 125 50 62
General and administrative - 550 - -
Intangible assets amortization
Cost of revenues 113 113 57 57
Compensation in relation to the IPO
Separation payment to shareholder - 750 - 750
IPO bonuses to employees - 270 - 270
1,675 2,783 843 1,674
Non-GAAP net income$1,322 $3,300 $716 $2,392
Non- GAAP diluted net income per share$0.04 $0.15 $0.02 $0.07
Weighted average number of shares
used in computing diluted net
income per share 32,006,613 21,657,529 31,985,387 32,145,288

KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
June 30, December 31,
2016 2015
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $11,309 $18,464
Short term bank deposits 18,001 22,000
Available for sale marketable securities 10,052 4,527
Trade receivables, net 26,253 22,598
Other accounts receivables and prepaid expenses 2,821 3,314
Inventory 20,069 15,803
Total current assets 88,505 86,706
LONG-TERM ASSETS:
Available for sale marketable securities 26,883 29,152
Severance pay fund 1,147 1,125
Property and equipment, net 6,070 4,778
Intangible assets, net 910 1,023
Other assets 716 568
Total long-term assets 35,726 36,646
Total assets $124,231 $123,352
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables $11,500 $13,230
Employees and payroll accruals 4,130 4,383
Deferred revenues and advances from customers 1,216 1,008
Other payables and accrued expenses 3,413 2,630
Total current liabilities 20,259 21,251
LONG-TERM LIABILITIES:
Accrued severance pay 1,815 1,839
Total long-term liabilities 1,815 1,839
SHAREHOLDERS' EQUITY 102,157 100,262
Total liabilities and shareholders' equity $124,231 $123,352

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,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net Income (loss)$ (353) $ 517 $ (127) $ 718
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 1,110 848 586 450
Share-based compensation 1,462 975 736 535
Amortization of premium on marketable securities 218 - 111 -
Increase in trade receivables (3,560) (1,491) (4,959) (1,111)
Decrease (increase) in other receivables and prepaid expenses 491 (1,252) 830 (580)
Increase in inventory (5,003) (1,737) (2,391) (389)
Increase in deferred taxes, net (132) (58) (467) (55)
Decrease (increase) in other long term assets (13) (100) 20 101
Increase (decrease) in trade payables (1,680) 3,120 29 1,230
Increase (decrease) in employees and payroll accruals (260) 687 479 67
Increase (decrease) in deferred revenues 203 (275) 214 83
Increase (decrease) in accrued severance pay, net (45) 42 (68) 93
Increase (decrease) in other payables and accrued expenses 852 338 964 (326)
Foreign currency translation gain (loss) on inter company balances with foreign subsidiaries (82) 403 303 (176)
Net cash provided by (used in) operating activities (6,792) 2,017 (3,740) 640
Cash flows from investing activities:
Purchase of property and equipment (1,533) (773) (797) (433)
Cash paid in connection with acquisition - (1,000) - -
Proceeds from bank deposits, net 3,999 - 2,000 -
Proceeds from maturity of marketable securities 2,500 - 3,023 -
Proceeds from sale of marketable securities 1,523 - - -
Purchase of marketable securities (7,131) - (3,622) -
Net cash provided by (used in) investing activities (642) (1,773) 604 (433)
Cash flows from financing activities:
Payment of deferred issuance cost - 75,232 - 75,600
Exercise of employee stock options 273 - 34 -
Net cash provided by financing activities 273 75,232 34 75,600
Foreign currency translation adjustments on cash and cash equivalents 6 (43) (17) 28
Decrease in cash and cash equivalents (7,161) 75,476 (3,102) 75,807
Cash and cash equivalents at the beginning of the period 18,464 4,993 14,428 4,591
Cash and cash equivalents at the end of the period 11,309 80,426 11,309 80,426
Non-cash investing and financing activities:
Purchase of property and equipment on credit 373 40 373 40
Issuance expenses on credit - 1,052 - 52
Inventory transferred to be used as property and equipment 799 284 799 27
Property and equipment transferred to be used as inventory - 106 - 106


Investor Contact: Michael Callahan, ICR (203) 682-8311 Michael.Callahan@icrinc.com

Source:Kornit Digital Ltd