GlobeNewswire Inc | Feb 16, 2021 04:05PM EST

February 16, 2021

Record Quarterwith 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 Digitals 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 worlds 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 Net of Warrants Warrants Impact Warrants Impact Impact Impact Revenue $72.3M $1.8M $48.7M $1.1MNon-GAAP Gross Margin 51.8% 117bps 50.2% 113bpsNon-GAAP Operating Margin 16.3% 203bps 12.0% 200bpsNon-GAAP Net Margin 16.0% 204bps 14.5% 194bpsNon-GAAP Diluted Earnings Per $0.24 $0.04 $0.17 $0.02Share

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 Net of Warrants Warrants Impact Warrants Impact Impact Impact Revenue $193.3M $5.4M $179.9M $5.1MNon-GAAP Gross Margin 46.7% 144bps 47.9% 144bpsNon-GAAP Operating Margin 2.7% 263bps 10.1% 248bpsNon-GAAP Net Margin 4.7% 257bps 10.9% 245bpsNon-GAAP Diluted Earnings Per $0.21 $0.12 $0.49 $0.13Share

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 Digitals 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 2020Results 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 Kornits 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. Kornits 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 SUBSIDIARIESCONSOLIDATED 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 SUBSIDIARIESCONSOLIDATED 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 revenuesProducts 75,040 71,057 24,923 17,746 Services 30,490 26,733 10,424 6,870 Total cost of 105,530 97,790 35,347 24,616 revenues Gross profit 87,801 82,076 36,944 24,034 Operating expenses:Research and 31,464 22,407 9,251 6,021 developmentSelling and 36,405 33,573 11,030 9,251 marketingGeneral and 26,661 18,498 7,704 5,454 administrativeTotaloperating 94,530 74,478 27,985 20,726 expensesOperating (6,729 ) 7,598 8,959 3,308 income (loss)Financialincome 3,498 3,313 (929 ) 2,186 (expenses),netIncome (loss)before taxes (3,231 ) 10,911 8,030 5,494 on income Taxes onincome (Tax 1,552 744 2,129 738 benefit)Net income (4,783 ) 10,167 5,901 4,756 (loss) Basic earnings(losses) per $ (0.11 ) $ 0.27 $ 0.13 $ 0.12 share Weightedaverage number of sharesused incomputing basic earnings(losses)per share 42,286,275 38,079,394 45,941,153 40,655,404 Dilutedearnings $ (0.11 ) $ 0.26 $ 0.12 $ 0.11 (losses) pershare Weightedaverage number of sharesused in computing diluted earnings (losses)per share 42,286,275 39,294,115 47,226,835 42,210,359

KORNIT DIGITAL LTD.AND ITS SUBSIDIARIESRECONCILIATION 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 $ 105,530 $ 97,790 $ 35,347 $ 24,616 revenuesCost of productrecorded for (1,056 ) (632 ) (284 ) (213 )share-basedcompensation (1)Cost of servicerecorded for (771 ) (520 ) (203 ) (146 )share-basedcompensation (1)Intangible assetsamortization on (100 ) (100 ) (25 ) (25 )cost of product(3)Excess cost ofproduct on - (2,790 ) - - acquiredinventory (a)Acquisitionrelated expenses - (28 ) - - (2)COVID-19 one time (520 ) - - - impact (4)Non-GAAP cost of $ 103,083 $ 93,720 $ 34,835 $ 24,232 revenues GAAP gross profit $ 87,801 $ 82,076 $ 36,944 $ 24,034 Gross profit 2,447 4,070 512 384 adjustmentsNon-GAAP gross $ 90,248 $ 86,146 $ 37,456 $ 24,418 profit GAAP operating $ 94,530 $ 74,478 $ 27,985 $ 20,726 expensesShare-based (8,209 ) (5,462 ) (2,239 ) (1,671 )compensation (1)Acquisitionrelated expenses (648 ) (291 ) - (234 )(2)Intangible assets (712 ) (757 ) (90 ) (225 )amortization (3)COVID-19 one time 69 - - - impact (4)Non-GAAPoperating $ 85,030 $ 67,968 $ 25,656 $ 18,596 expenses GAAP Financial $ 3,498 $ 3,313 $ (929 ) $ 2,186 income (loss)Foreign exchangelosses associated 1,320 250 1,292 (530 )with ASC 842Non-GAAP $ 4,818 $ 3,563 $ 363 $ 1,656 Financial income GAAP Taxes onincome (Tax $ 1,552 $ 744 $ 2,129 $ 738 benefit)Tax effect on tothe above 706 1,021 360 88 non-GAAPadjustmentsTaxes on income (1,259 ) 388 (1,869 ) (419 )(Tax benefit) (b)Non-GAAP Taxes onincome (Tax $ 999 $ 2,153 $ 620 $ 407 benefit) GAAP net income $ (4,783 ) $ 10,167 $ 5,901 $ 4,756 (loss)Share-based 10,036 6,614 2,726 2,030 compensation (1)Acquisitionrelated expenses 648 319 - 234 (2)Intangible assets 812 857 115 250 amortization (3)COVID-19 one time 451 - - - impact (4)Excess cost ofproduct on - 2,790 - - acquiredinventory (a)Foreign exchangelosses associated 1,320 250 1,292 (530 )with ASC 842Tax effect on tothe above (706 ) (1,021 ) (360 ) (88 )non-GAAPadjustmentsDeferred taxes onincome (Tax 1,259 (388 ) 1,869 419 benefit) (b)Non-GAAP net $ 9,037 $ 19,588 $ 11,543 $ 7,071 income (loss) GAAP dilutedearnings (losses) $ (0.11 ) $ 0.26 $ 0.12 $ 0.11 per share Non-GAAP dilutedearnings (losses) $ 0.21 $ 0.49 $ 0.24 $ 0.17 per share Weighted average number of shares Shares used incomputing GAAPdiluted net 42,286,275 39,294,115 47,226,835 42,210,359 earnings (losses)per share Shares used incomputingNon-GAAP diluted 43,712,110 39,751,470 47,556,867 42,710,001 net earnings(losses) pershare (1) Share-based compensation Cost of product 1,056 632 284 213 revenues Cost of service 771 520 203 146 revenues Research and 1,712 1,294 469 360 development Selling and 2,893 1,689 743 557 marketing General and 3,604 2,479 1,027 754 administrative 10,036 6,614 2,726 2,030 (2) Acquisition related expenses Cost of product - 28 - - revenues Selling and - 14 - - marketing General and 648 277 - 234 administrative 648 319 - 234 (3) Intangibleassets amortization Cost of product 100 100 25 25 revenues Research and 350 - 35 - development Selling and 362 757 55 225 marketing 812 857 115 250 (4) COVID-19 one time impact Cost of product 527 - - - revenues Cost of service (7 ) - - - revenues Research and (57 ) - - - development Selling and (1 ) - - - marketing General and (11 ) - - - administrative 451 - - -

Consists of charges to cost of revenues for the difference between the higher carrying cost of the acquired inventory from a distributor (a) 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 SUBSIDIARIESCONSOLIDATED 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 fromoperating activities: Net income (loss) $ (4,783 ) $ 10,167 $ 5,901 $ 4,756 Adjustments toreconcile netincome to net cash provided byoperatingactivities:Depreciation and 4,711 4,441 1,300 1,082 amortizationFair value ofwarrants deducted 5,366 5,094 1,802 1,130 from revenuesShare-based 10,036 6,614 2,726 2,030 compensationAmortization ofdiscount on 395 (112 ) 147 7 marketablesecuritiesRealized gain onsale of marketable (503 ) (271 ) - - securitiesDecrease (increase)in trade (9,529 ) (18,617 ) (1,596 ) 4,727 receivablesIncrease in otherreceivables and (2,333 ) (1,204 ) (718 ) (1,609 )prepaid expensesIncrease in (15,827 ) (4,183 ) (6,298 ) (3,076 )inventoryIncrease inoperating leases (56 ) (571 ) (27 ) (623 )right-of-use assetsDecrease (increase)in deferred taxes, 2,177 (5 ) 3,000 627 netDecrease in other 54 386 16 182 long term assetsIncrease in trade 6,864 6,032 6,293 5,585 payablesIncrease inoperating lease 1,321 898 1,292 118 liabilitiesIncrease inemployees and 6,366 1,423 2,048 239 payroll accrualsIncrease (decrease)in deferredrevenues and 24,286 (921 ) 16,623 202 advances fromcustomersIncrease in otherpayables and 4,822 1,708 2,702 54 accrued expensesIncrease (decrease)in accrued 143 26 62 (20 )severance pay, netDecrease in otherlong term (877 ) (136 ) (925 ) (13 )liabilitiesLoss from sale anddisposal of 139 23 64 22 property andEquipmentForeign currencytranslation income(loss) on inter (362 ) 212 (68 ) (472 )company balanceswith foreignsubsidiaries Net cash providedby operating 32,410 11,004 34,344 14,948 activities Cash flows frominvesting activities: Purchase ofproperty and (13,489 ) (5,416 ) (2,731 ) (1,351 )equipmentAcquisition ofintangible assetsand capitalization (121 ) (1,337 ) - (538 )of softwaredevelopment costsProceeds from saleof property and 4 3 - - equipmentCash paid inconnection with (15,535 ) (4,715 ) (476 ) - acquisitionIncrease in bank (129,804 ) (90,000 ) (172,996 ) (1,000 )depositsProceeds from saleof marketable 58,532 34,497 - 3,052 securitiesProceeds frommaturity of 21,706 3,000 1,700 1,500 marketablesecuritiesPurchase ofmarketable (35,923 ) (115,529 ) (17,381 ) (70,930 )securities Net cash used ininvesting (114,630 ) (179,497 ) (191,884 ) (69,267 )activities Cash flows fromfinancing activities: Proceeds fromsecondary offering, 162,720 129,710 - - netPayment of deferred (739 ) - (739 ) - issuance costExercise ofemployee stock 5,660 5,901 718 501 optionsPayments related toshares withheld for (596 ) (177 ) (514 ) (177 )taxesPayment ofcontingent - (303 ) - - consideration Net cash providedby (used in) 167,045 135,131 (535 ) 324 financingactivities Foreign currencytranslationadjustments on cash 209 (27 ) 172 68 and cashequivalentsIncrease (decrease)in cash and cash 85,034 (33,389 ) (157,903 ) (53,927 )equivalentsCash and cashequivalents at the 40,743 74,132 283,680 94,670 beginning of theperiodCash and cashequivalents at the 125,777 40,743 125,777 40,743 end of the period Non-cashinvestingand financing activities: Purchase ofproperty and 1,904 920 1,904 920 equipment on creditInventorytransferred to be 990 - 167 - used as propertyand equipmentProperty andequipment 115 - 64 - transferred to beused as inventoryIssuance expenses - - - - on creditAcquisition costs - - - - on creditLease liabilitiesarising from 2,929 9,640 160 8,307 obtainingright-of-use assetsCapitalization ofsoftware - 112 - 112 development costs

Investor Contact:Allise FurlaniThe Blueshirt Group(212) 331-8433Allise@blueshirtgroup.com