KORNIT DIGITAL
(NASDAQ: KRNT)
Q3 2020 EARNINGS CALL SUPPORTING SLIDES
1 © 2020 Kornit
SAFE HARBOR
This presentation contains forward-looking statements within the meaning of U.S. securities laws. All statements other than statements of historical fact contained in this presentation are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements reflect our current views with respect to future events and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance or events or circumstances described in the presentation will occur or be achieved. You should read the Company's most recent annual report on Form 20-F and its prospectus supplement to the prospectus contained in its registration statement on Form F-3, filed with the U.S. Securities and Exchange Commission on March 23, 2020 and September 17, 2020, respectively, including the Risk Factors set forth therein, completely and with the understanding that our actual future results may be materially different from what we expect. Specifically, we face the risk that the duration of the global COVID-19 pandemic may continue on for a further significant period of time be extensive, which could continue to impact, in a material adverse manner, our operations, financial position and cash flows, and those of our customers and suppliers. Except as required by law, we undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this presentation.
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP.
This presentation contains statistical data that we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified this statistical data.
Kornit, Kornit Digital, the K logo, and NeoPigment are trademarks of Kornit Digital Ltd. All other trademarks are the property of their respective owners and are used for reference purposes only. Such use should not be construed as an endorsement of our products or services.
2 © 2020 Kornit Digital. All rights reserved.
OUR VISION
CREATE A BETTER WORLD
WHERE EVERYBODY CAN BOND, DESIGN AND EXPRESS THEIR IDENTITIES, ONE IMPRESSION AT A TIME
3
3 | © All rights reserved Kornit Digital 2019
ON TODAY'S CALL
4 © 2020 Kornit Digital. All rights reserved.
Ronen Samuel | Guy Avidan | Amir Shaked Mandel |
CEO | CFO | EVP Corp Dev |
BUSINESS HIGHLIGHTS
RONEN SAMUEL
CEO
5 © 2020 Kornit
EXCEEDED EXPECTATIONS FOR THIRD QUARTER
IMPROVING OUTLOOK FOR THE SECOND HALF OF THE YEAR
- Total revenue of $57.4 million, net of $2.2 million in warrants related to a global strategic account
- Sequential growth of approximately 53% in Q3 compared to Q2 2020
- Year over year growth of approximately 21%
- Strong demand for industrial systems in North America and EMEA
- Extraordinary quarter for consumables and services across all regions
- Important milestone in services business:
- Sustainable profitability a quarter ahead of plan, while maintaining focus on customer excellence
- Expect services margins to improve as we continue to scale the business.
- Strong operating margin for the quarter and expect to over-achieve our operating profit objective for 2020
6 © 2020 Kornit Digital. All rights reserved.
ACTIVITY AND BUSINESS MOMENTUM
INDUSTRY AT AN INFLECTION POINT, WE ARE FOCUSED ON LEADING THE TRANSFORMATION TO ON-DEMAND
- Partnering with customers to deliver incremental demand for systems, ink and services as we enter holiday season
- Engaged in large scale expansion projects in North America
- Unique partnership with Delta Apparel and Hot Topics
- EMEA experiencing resurgence
- UK investments yield immediate results
- Encouraging signs of industry recovery in Asia Pacific
- Scaling local sales and support infrastructure required to deliver on global expansion projects
- Welcoming Tokyo-based seasoned executive, to lead Asia Pacific and scale operations
7 © 2020 Kornit Digital. All rights reserved.
ACTIVITY AND BUSINESS MOMENTUM
- Unprecedented success of the Atlas
- Record shipment quarter
- Accelerating R&D efforts for next generation of applications
- Considerable traction for the Vulcan Plus with customers investing in fleets
- Phenomenal momentum for DTF, fueled by transition of fashion industry to sustainable on-demand manufacturing
- Important deal with Italian digital fulfillment partner to some of the largest fashion brands in the world
- Execution with global strategic account remains very strong
- Custom Gateway acquisition is at the heart of our solution strategy
- Impact exceeding expectations and pleased with integration progress
- Generated over 80 opportunities globally since announcement, and received multiple orders
8 © 2020 Kornit Digital. All rights reserved.
EXTREMELY WELL POSITIONED
- Seeing strong momentum and entering 2021 with a very strong backlog
- Increasing outlook for second half of the year:
- From low double-digityear-over-year revenue growth, to 25% YoY growth
- Welcome to our new shareholders
- Exciting times for Kornit and for the entire textile industry
- Extremely confident to execute on the massive opportunity ahead of us
9 © 2020 Kornit Digital. All rights reserved.
FINANCIALS HIGHLIGHTS
GUY AVIDAN
CFO
10 © 2020 Kornit
QUARTERLY WARRANTS IMPACT
Q3 20 | Q2 20 | Q3 2019 | |||||||
Net of | Warrants | Net of | Warrants | Net of | Warrants | ||||
Impact | Impact | Impact | |||||||
Warrants | Warrants | Warrants | |||||||
Impact | K$/BPS/EP | Impact | K$/BPS/EP | Impact | K$/BPS/ | ||||
S | S | EPS | |||||||
Revenues | $57,392 | $2,158 | $59,550 | $37,436 | $842 | $38,278 | $47,293 | $2,429 | $49,722 |
Gross Profit | $27,619 | $29,777 | $16,512 | $17,354 | $22,570 | $24,999 | |||
Gross Margin | 48.1% | 188 BPS | 50.0% | 44.1% | 123 BPS | 45.3% | 47.7% | 255 BPS | 50.3% |
Operating Profit | $6,460 | $8,618 | -$2,543 | -$1,701 | $6,162 | $8,591 | |||
Operating Margin | 11.3% | 322 BPS | 14.5% | -6.8% | 235 BPS | -4.4% | 13.0% | 425 BPS | 17.3% |
Net Profit | $7,729 | $9,887 | -$1,330 | -$488 | $6,591 | $9,020 | |||
Net Margin | 13.5% | 314 BPS | 16.6% | -3.6% | 228 BPS | -1.3% | 13.9% | 420 BPS | 18.1% |
Diluted EPS | $0.18 | $0.05 | $0.23 | -$0.03 | $0.02 | -$0.01 | $0.16 | $0.05 | $0.21 |
$ in thousands except per share amounts
11 © 2020 Kornit Digital. All rights reserved.
Q3 2020 FINANCIAL RESULTS
GAAP | |||
Q3 2020 | Q3 2019 | YoY | |
Change | |||
Total Revenue | $57.4 | $47.3 | $10.1 |
Gross Profit | |||
$27.0 | $22.2 | $4.8 | |
Operating Income (Loss) | $2.7 | $4.1 | ($1.4) |
Net Income (Loss) | |||
$3.9 | $4.7 | ($0.8) | |
Diluted EPS | |||
$0.09 | $0.11 | ($0.02) | |
Diluted Shares (M) | |||
42.7 | 42.2 | 0.5 | |
$ in millions except per share and share amounts
Non-GAAP
Q3 2020 | Q3 2019 | YoY |
Change | ||
$57.4 | $47.3 | $10.1 |
$27.6 | $22.6 | $5.0 |
$6.5 | $6.2 | $0.3 |
$7.7 | $6.6 | $1.1 |
$0.18 | $0.16 | $0.02 |
43.0 | 42.2 | 0.8 |
12 © 2020 Kornit Digital. All rights reserved.
QUARTERLY REVENUES
- Revenues of $57.4 million vs. $47.3 million in prior year, an increase of 21.4% YoY and an increase of 53.3% QoQ
- A global customer accounted for 14.8% of revenues compared to 20.2% in prior year
- 10 largest accounts represented 58.3% of revenues compared to 56.3% in prior year
Q3 2020 | Geographic Revenue Split | Q2 2020 | |
Geographic Segments % | Geographic Segments % | ||
8% | 10% | ||
31% | 24% | ||
61% | |||
66% | |||
Americas EMEA | Asia Pacific | Americas EMEA Asia Pacific |
13 © 2020 Kornit Digital. All rights reserved.
QUARTERLY GROSS MARGIN AND OPEX
- Non-GAAPgross margin of 48.1% increased from 47.7% in Q3 2019
- Non-GAAPoperating expenses of $21.2 million increased 29.0% year over year
Q3 2020 | Q3 2019 | ||
Research & Development | 13.8% | 11.2% | |
Sales & Marketing | 13.5% | 15.1% | |
General & Administrative | 9.6% | 8.5% | |
Total Operating Expenses | 36.9% | 34.8% | |
14 © 2020 Kornit Digital. All rights reserved.
QUARTERLY P&L KPI
Q3 2020 | Q3 2019 | |
Non-GAAP Operating Income (Loss) | $6.5 | $6.2 |
Non-GAAP Net Income (Loss) | ||
$7.7 | $6.6 | |
Non-GAAP Diluted EPS | ||
$0.18 | $0.16 | |
GAAP Net Income (Loss) | $3.9 | $4.7 |
GAAP Diluted EPS | ||
$0.09 | $0.11 | |
Adjusted EBITDA | ||
$9.4 | $13.1 | |
$ in millions except per share amounts
15 © 2020 Kornit Digital. All rights reserved.
QUARTERLY BALANCE SHEET AND CASH FLOW
Balance Sheet
Q32020 | Q22020 | Q32019 | ||
Cash, Bank Deposits and MK Securities | 405.3 | 237.4 | 250.4 | |
Accounts Receivables | 49.7 | 39.8 | 44.9 | |
Inventory | 46.3 | 42.1 | 34.4 | |
Trade Payable | 24.8 | 13.0 | 17.3 | |
Net Working Capital | 388.7 | 217.7 | 259.8 |
$ in millions
16 © 2020 Kornit Digital. All rights reserved.
Cash from Operating Activities
20.4
0.0
(9.2)
Q3 2020 | Q2 2020 | Q3 2019 |
$ in millions
WARRANTS IMPACT AND VESTING
- Revenue recognition base impact ** Collection base impact
*** During Q3 2,162,463 of the warrants were exercised
17 © 2020 Kornit Digital. All rights reserved.
AMAZON WARRANTS AGREEMENT
- 2,932,176 warrants to purchase ordinary shares of the Company at an exercise price of $13.04 were issued to Amazon as a customer incentive. The warrants are subject to vesting as a function of payments for purchased products and services of up to $150 million beginning on May 1, 2016, with the shares vesting incrementally each time Amazon makes a payment totaling $5 million to the Company.
- As part of September 16, 2020 secondary public offering, Amazon exercised 2,162,463 warrants by cashless sale of 1,689,942 shares. As of September 30, 2020, 109,956 warrants are exercisable.
- The Company utilized the Monte Carlo simulation approach to estimate the fair value of the warrants. We early adopted the new guidance as of January 1, 2019 and will use the fair value of the unvested warrants on the adoption date rather than upon the later vesting dates in order to determine the reduction of the transaction price
- The Company recognized a reduction to revenues of $2.2 million during the third quarter of 2020 and $2.4 million during the third quarter of 2019 ($5.1 million during the year ended December 31, 2019)
18 © 2020 Kornit Digital. All rights reserved.
Q4 2020 GUIDANCE*
- Revenue is expected to be between $60.0 million to $64.0 million
- Non-GAAPoperating income is expected to be between 13% to 16% of revenue
*we assume zero impact on revenue and operating margin for the purposes of guidance
19 © 2020 Kornit Digital. All rights reserved.
THANK YOU
OUR VISION
CREATE A BETTER WORLD
WHERE EVERYBODY CAN BOND, DESIGN AND
EXPRESS THEIR IDENTITIES, ONE IMPRESSION AT A TIME
© 2020 Kornit Digital. All rights reserved.
WARRANTS IMPACT CHANGE IN ASU
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | 2019 | |
GAAP prior to adoptation of ASU 2019-08 | 38,161 | 43,890 | 44,581 | 48,649 | 175,281 |
Warrants impact prior to adoptation of ASU 2019-08 Warrants impact %
989 | 2,416 | 5,143 | 1,130 | 9,678 |
2.5% | 5.2% | 10.3% | 2.3% | 5.2% |
Warrants impact after adoptation of ASU 2019-08 | 560 | 974 | 2,429 | 1,130 | 5,093 | |
Warrants impact % | 1.4% | 2.2% | 5.2% | 2.3% | 2.8% | |
GAAP after adoptation of ASU 2019-08 | 38,590 | 45,332 | 47,295 | 48,649 | 179,866 |
21 © 2020 Kornit Digital. All rights reserved.
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Kornit Digital Ltd. published this content on 10 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 November 2020 22:02:03 UTC