GlobeNewswire Inc | Nov 10, 2020 04:05PM EST

November 10, 2020

-- Third quarter revenue of $57.4 million, net of non-cash warrants impact of $2.2 million -- Third quarter GAAP operating profit of $2.7 million; Non-GAAP operating profit of $6.5 million, net of $2.2 million attributed to the non-cash impact of warrants -- Revenue growth and overall business performance exceed previous expectations -- Milestone in sustainable services profitability achieved a quarter ahead of plan -- Strong operating leverage, inclusive of investments in innovation and scaling go-to-market -- Excellent momentum with Custom Gateway introduction and integration

ROSH-HA'AYIN, Israel, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (NASDAQ: KRNT), a company that develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries, today reported results for the third quarter ended September 30, 2020.

We delivered a very strong third quarter, exceeding our expectations on revenue growth and profitability, as we continue to engage in exciting projects with leading global brands and fulfillers across geographies. Our industry is accelerating the transition to digital sustainable on-demand manufacturing and we have never been better positioned to meet the market opportunities ahead of us, said Ronen Samuel, Kornit Digitals CEO. Looking forward, we see huge momentum in the business, and we are entering 2021 with a very strong pipeline.

2019 GAAP and Non-GAAP figures in todays 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 third quarter of 2020 and 2019, respectively:

Third Quarter Warrants Impact

Three Months Ended September 30, 2020 2019 Net of Warrants Net of Warrants Warrants Impact Warrants Impact Impact Impact Revenue $57.4M $2.2M $47.3M $2.4MNon-GAAP Gross Margin 48.1% 188bps 47.7% 255bpsNon-GAAP Operating Margin 11.3% 322bps 13.0% 425bpsNon-GAAP Net Margin 13.5% 314bps 13.9% 420bpsNon-GAAP Diluted Earnings Per $0.18 $0.05 $0.16 $0.05Share

We are very pleased with our business acceleration as third quarter revenue of $57.4 million, net of $2.2 million attributed to the non-cash impact of warrants reflects an increase of 21.4 percent year-over-year. Customers and partners are ramping production not only to meet the upcoming holiday season but also the unprecedented and sustained demand in e-commerce, said Guy Avidan, Kornit Digitals Chief Financial Officer. Given third quarter outperformance and the strength of our pipeline we are raising our previously provided second-half 2020 revenue outlook from low double-digit to 25 percent year-over-year growth.

Third Quarter 2020 Results of Operations

-- Total revenue for the third quarter of 2020 was $57.4 million, net of $2.2 million attributed to the non-cash impact of warrants, compared to $47.3 million, net of $2.4 million attributed to the non-cash impact of warrants in the prior year period. -- GAAP net income for the third quarter of 2020 was $3.9 million, or $0.09 per diluted share, compared to net income of $4.7 million, or $0.11 per diluted share, for the third quarter of 2019. -- Non-GAAP net income for the third quarter of 2020 was $7.7 million, or $0.18 per diluted share, including $0.05 per diluted share attributed to the non-cash impact of warrants, compared to non-GAAP net income of $6.6 million, or $0.16 per diluted share, net of $0.05 per diluted share attributed to the non-cash impact of warrants, for the third quarter of 2019.

Fourth Quarter 2020 Guidance

The Company will discuss its expectations for the fourth quarter of 2020 live during its earnings conference call, which will be available for replay via webcast at ir.kornit.com, as referenced below.

Third 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 13711406.

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 13711406. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, November 10, 2020, until 11:59 p.m. ET on Tuesday, November 24, 2020. 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 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.

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 SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands) September 30, December 31, 2020 2019 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 283,680 $ 40,743 Short-term bank deposit 51,808 95,000 Marketable securities 10,723 32,567 Trade receivables, net 49,685 40,510 Inventory 46,268 37,477 Other accounts receivable and prepaid 8,495 6,985 expensesTotal current assets 450,659 253,282 LONG-TERM ASSETS: Marketable securities 59,057 95,393 Deposits and prepaid expenses 406 356 Severance pay fund 297 301 Deferred taxes 7,067 7,781 Property, plant and equipment, net 25,844 17,489 Operating lease right-of-use assets 21,837 22,806 Intangible assets, net 11,474 2,494 Goodwill 13,629 5,564 Total long-term assets 139,611 152,184 Total assets $ 590,270 $ 405,466 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 24,812 $ 23,449 Employees and payroll accruals 13,434 9,165 Deferred revenues and advances from customers 10,373 2,688 Operating lease liabilities 3,893 3,902 Other payables and accrued expenses 9,421 6,373 Total current liabilities 61,933 45,577 LONG-TERM LIABILITIES: Accrued severance pay 1,112 1,035 Operating lease liabilities 18,271 19,231 Other long-term liabilities 1,368 1,320 Total long-term liabilities 20,751 21,586 SHAREHOLDERS' EQUITY 507,586 338,303 Total liabilities and shareholders' equity $ 590,270 $ 405,466

KORNIT DIGITAL LTD.AND ITS SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(U.S. dollars in thousands, except share and per share data) Nine Months Ended Three Months Ended September 30, September 30, 2020 2019 2020 2019 (Unaudited) (Unaudited) Revenues Products $ 103,536 $ 114,347 $ 49,290 $ 43,317 Services 17,504 16,869 8,102 3,976 Total revenues 121,040 131,216 57,392 47,293 Cost of revenuesProducts 50,117 53,311 23,031 19,102 Services 20,066 19,863 7,330 5,972 Total cost of 70,183 73,174 30,361 25,074 revenues Gross profit 50,857 58,042 27,031 22,219 Operating expenses:Research and 22,213 16,386 8,689 5,610 developmentSelling and 25,375 24,322 8,587 7,849 marketingGeneral and 18,957 13,044 7,093 4,688 administrativeTotaloperating 66,545 53,752 24,369 18,147 expensesOperating (15,688 ) 4,290 2,662 4,072 income (loss)Financial 4,427 1,127 1,630 582 income, netIncome (loss)before taxes (11,261 ) 5,417 4,292 4,654 on income Taxes onincome (Tax (577 ) 6 350 (14 )benefit)Net income (10,684 ) 5,411 3,942 4,668 (loss) Basic earnings(losses) per $ (0.26 ) $ 0.15 $ 0.09 $ 0.12 share Weightedaverage number of sharesused incomputing basic earnings(losses)per share 41,059,090 37,208,558 41,536,835 40,471,832 Dilutedearnings $ (0.26 ) $ 0.14 $ 0.09 $ 0.11 (losses) pershare Weightedaverage number of sharesused in computing diluted earnings (losses)per share 41,059,090 38,584,788 42,692,989 42,159,655

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) Nine Months Ended Three Months Ended September 30, September 30, 2020 2019 2020 2019 (Unaudited) (Unaudited) GAAP cost of $ 70,183 $ 73,174 $ 30,361 $ 25,074 revenuesCost of productrecorded for (772 ) (419 ) (281 ) (182 )share-basedcompensation (1)Cost of servicerecorded for (568 ) (374 ) (208 ) (144 )share-basedcompensation (1)Intangible assetsamortization on (75 ) (75 ) (25 ) (25 )cost of product(3)Excess cost ofproduct on - (2,790 ) - - acquired inventory(a)Acquisitionrelated expenses - (28 ) - - (2)COVID-19 one time (520 ) - (74 ) - impact (4)Non-GAAP cost of $ 68,248 $ 69,488 $ 29,773 $ 24,723 revenues GAAP gross profit $ 50,857 $ 58,042 $ 27,031 $ 22,219 Gross profit 1,935 3,686 588 351 adjustmentsNon-GAAP gross $ 52,792 $ 61,728 $ 27,619 $ 22,570 profit GAAP operating $ 66,545 $ 53,752 $ 24,369 $ 18,147 expensesShare-based (5,970 ) (3,791 ) (2,191 ) (1,515 )compensation (1)Acquisitionrelated expenses (648 ) (57 ) (648 ) - (2)Intangible assets (622 ) (532 ) (371 ) (224 )amortization (3)COVID-19 one time 69 - - - impact (4)Non-GAAP operating $ 59,374 $ 49,372 $ 21,159 $ 16,408 expenses GAAP Financial $ 4,427 $ 1,127 $ 1,630 $ 582 incomeForeign exchangelosses associated 28 780 110 242 with ASC 842Non-GAAP Financial $ 4,455 $ 1,907 $ 1,740 $ 824 income GAAP Taxes onincome (Tax $ (577 ) $ 6 $ 350 $ (14 )benefit)Tax effect on tothe above non-GAAP 346 933 526 62 adjustmentsTaxes on income 610 807 (405 ) 347 (Tax benefit) (b)Non-GAAP Taxes onincome (Tax $ 379 $ 1,746 $ 471 $ 395 benefit) GAAP net income $ (10,684 ) $ 5,411 $ 3,942 $ 4,668 (loss)Share-based 7,310 4,584 2,680 1,841 compensation (1)Acquisitionrelated expenses 648 85 648 - (2)Intangible assets 697 607 396 249 amortization (3)COVID-19 one time 451 - 74 - impact (4)Excess cost ofproduct on - 2,790 - - acquired inventory(a)Foreign exchangelosses associated 28 780 110 242 with ASC 842Tax effect on tothe above non-GAAP (346 ) (933 ) (526 ) (62 )adjustmentsDeferred taxes onincome (Tax (610 ) (807 ) 405 (347 )benefit) (b)Non-GAAP net $ (2,506 ) $ 12,517 $ 7,729 $ 6,591 income (loss) GAAP dilutedearnings (losses) $ (0.26 ) $ 0.14 $ 0.09 $ 0.11 per share Non-GAAP dilutedearnings (losses) $ (0.06 ) $ 0.32 $ 0.18 $ 0.16 per share Weighted average number of shares Shares used incomputing GAAPdiluted net 41,059,090 38,584,788 42,692,989 42,159,655 earnings (losses)per share Shares used incomputing Non-GAAPdiluted net 41,059,090 38,753,127 42,972,182 42,247,859 earnings (losses)per share (1) Share-based compensation Cost of product 772 419 281 182 revenues Cost of service 568 374 208 144 revenues Research and 1,243 934 463 334 development Selling and 2,150 1,132 769 496 marketing General and 2,635 1,725 1,017 685 administrative 7,368 4,584 2,738 1,841 (2) Acquisition related expenses Cost of product - 28 - - revenues Research and - - - - development Selling and - 14 - - marketing General and 648 43 648 - administrative 648 85 648 - (3) Intangibleassets amortization Cost of product 75 75 25 25 revenues Research and 315 - 315 - development Selling and 307 532 56 224 marketing 697 607 396 249 (4) COVID-19 one time impact Cost of product 527 - 74 - revenues Cost of service (7 ) - - - revenues Research and (57 ) - - - development Selling and (1 ) - - - marketing General and (11 ) - - - administrative 451 - 74 - 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) Nine Months Ended Three Months Ended September 30, September 30, 2020 2019 2020 2019 (Unaudited) (Unaudited) Cash flows fromoperating activities: Net income (loss) $ (10,684 ) $ 5,411 $ 3,942 $ 4,668 Adjustments toreconcile netincome to net cash provided byoperatingactivities:Depreciation and 3,411 3,359 1,215 1,137 amortizationFair value ofwarrants deducted 3,564 3,964 2,158 2,430 from revenuesShare-based 7,310 4,584 2,680 1,841 compensationAmortization ofdiscount on 248 (119 ) 83 (35 )marketablesecuritiesRealized gain onsale of marketable (503 ) (271 ) (401 ) - securitiesIncrease in trade (7,933 ) (23,344 ) (8,549 ) (11,181 )receivablesDecrease (increase)in other (1,615 ) 405 (771 ) (345 )receivables andprepaid expensesDecrease (increase) (9,529 ) (1,107 ) (4,324 ) 418 in inventoryDecrease (increase)in operating leases (29 ) 52 (62 ) 18 right-of-use assetsDecrease (increase)in deferred taxes, (823 ) (632 ) 561 14 netDecrease in other 38 204 120 - long term assetsIncrease (decrease) 571 447 10,462 (3,335 )in trade payablesIncrease inoperating lease 29 780 111 242 liabilitiesIncrease inemployees and 4,318 1,184 3,983 1,967 payroll accrualsIncrease (decrease)in deferredrevenues and 7,663 (1,123 ) 7,770 651 advances fromcustomersIncrease in otherpayables and 2,120 1,654 1,688 702 accrued expensesIncrease in accrued 81 46 18 39 severance pay, netIncrease (decrease)in other long term 48 (123 ) 191 87 liabilitiesLoss from sale anddisposal of 75 1 - 1 property andEquipmentForeign currencytranslation income(loss) on inter (294 ) 684 (477 ) 673 company balanceswith foreignsubsidiaries Net cash providedby (used in) (1,934 ) (3,944 ) 20,398 (8 )operatingactivities Cash flows frominvesting activities: Purchase ofproperty and (10,758 ) (4,065 ) (2,247 ) (2,101 )equipmentAcquisition ofintangible assetsand capitalization (121 ) (799 ) - (149 )of softwaredevelopment costsProceeds from saleof property and 4 3 - 3 equipmentCash paid inconnection with (15,059 ) (4,715 ) (15,059 ) - acquisitionDecrease (increase) 43,192 (89,000 ) 27,996 (12,000 )in bank depositsProceeds from saleof marketable 58,532 31,445 37,730 1,000 securitiesProceeds frommaturity of 20,006 1,500 2,561 1,000 marketablesecuritiesPurchase ofmarketable (18,542 ) (44,599 ) - - securities Net cash providedby (used in) 77,254 (110,230 ) 50,981 (12,247 )investingactivities Cash flows fromfinancing activities: Proceeds fromsecondary offering, 162,720 129,710 162,720 (669 )netExercise ofemployee stock 4,942 5,400 2,138 3,131 optionsPayments related toshares withheld for (82 ) - (18 ) - taxesPayment ofcontingent - (303 ) - - consideration Net cash providedby financing 167,580 134,807 164,840 2,462 activities Foreign currencytranslationadjustments on cash 37 (95 ) 13 (87 )and cashequivalentsIncrease (decrease)in cash and cash 242,937 20,538 236,232 (9,880 )equivalentsCash and cashequivalents at the 40,743 74,132 47,448 104,550 beginning of theperiodCash and cashequivalents at the 283,680 94,670 283,680 94,670 end of the period Non-cashinvestingand financing activities: Purchase ofproperty and 382 359 382 359 equipment oncreditInventorytransferred to be 823 167 312 167 used as propertyand equipmentProperty andequipment 51 - - - transferred to beused as inventoryIssuance expenses 739 - 739 - on creditAcquisition costs 204 - 204 - on creditLease liabilitiesarising fromobtaining 2,769 1,333 849 531 right-of-useassetsCapitalization ofsoftware - 151 - 151 development costs

Investor Contact:Kelsey TurcotteThe Blueshirt Group(917) 842-0334Kelsey@blueshirtgroup.com