Kornit Digital : Q4 2019 Investor Presentation

February 11, 2020 at 05:23 pm EST

KORNIT DIGITAL

(NASDAQ: KRNT)

Q4 and Full Year 2019 Earnings Call: Supporting Slides

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, filed with the U.S. Securities and Exchange Commission on March 26, 2019, 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. 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.

SPEAKERS ON TODAY'S CALL

Ronen Samuel	Guy Avidan
CEO	CFO

OUR VISION

CREATE A BETTER WORLD

WHERE EVERYBODY CAN BOND, DESIGN AND

EXPRESS THEIR IDENTITIES, ONE IMPRESSION AT A TIME

Q4 2019

BUSINESS HIGHLIGHTS

RONEN SAMUEL

CEO

STRONG FINISH TO A SUPERB YEAR

Phenomenal performance in Q4
Completion of first year of five-year journey to $500M sales run rate business
Industry in need for on-demand textile manufacturing in a sustainable way
Kornit's leadership position continues to widen
Time to continue investing and accelerate efforts to capture huge opportunity

2019 KEY EXECUTION ACHIEVEMENTS

Delivered strong financial performance
Successfully launched innovative Atlas, Poly Pro, Presto - all experiencing great momentum and opening new markets
Significant progress with leading brands
Growth in strategic accounts and creation of many new accounts
Accelerated our DTF business
Scaled and professionalized our GTM across regions
Phenomenal execution on our go-direct sales model in North America

Q4 BUSINESS HIGHLIGHTS

Delivered revenues of $48.7 million, net of $1.1 million of warrants impact
Business volume grew by 27.1%
- Outstanding systems sales
- Growing momentum in DTF business
- Robust peak season for strategic and regional accounts
Continued strong adoption of HD, Atlas, Presto and Poly Pro
Pleased with Presto momentum, opens large market opportunity
Footprint expansion in strategic accounts and continued engagement with brands

Q4 REGIONAL HIGHLIGHTS

Strong finish across regions
- Record systems sales quarter for Americas, and momentum continuing into 2020
- Chuck Mayo joining Kornit as President of Americas
Monitoring China situation, sending message of hope and strength to all impacted
- Do not anticipate material negative impact to top line
- No manufacturing in China
- Some supply chain dependency on raw materials, could be reasonably mitigated

STRONG START TO 2020

ISS Long Beach showcased the newly launched Vulcan Plus and Storm Light
Starting year with a very strong pipeline
Expecting Q1 business volume to be in the range of Q4, a material and exciting deviation from typical Q4 to Q1 seasonality
Very good visibility into the rest of the year
Currently engaged in big expansion projects with some strategic accounts
Investing in business to realize these expansions
Anticipating modest operating margins in H1 2020, offset by operating margin improvements in H2 2020, resulting in overall operating margin expansion for full year 2020

Well positioned to meet 5 year / $500 million sales run rate goal, and with right investments can even accelerate growth on path to goal

Tel Aviv Innovation Event

Hosted by Kornit Digital

21-24 April 2020

Meet the world's most influential fashion and textile brands and learn about their opportunities and challenges

Discover cutting-edge technology innovation in garment & fashion production to future-proof your business

Establish your network with

printing

industry leaders

CUSTOMERS

CHANNEL & PROSPECTS PARTNERS

WORLD'S

INVESTORS LEADING

BRANDS

SUPPLIERS

INFLUENCERS

JOURNALISTS

Q4 2019

FINANCIAL OVERVIEW

GUY AVIDAN

CFO

Q4 2019 FINANCIAL RESULTS

Total Revenue

Gross Profit

Operating Income

Net Income

Diluted EPS

Diluted Shares (M)

$ In millions except per share and share amounts

GAAP

Q4 2019	Q4 2018	YoY
Change

$48.7	$37.8	$10.9

$24.0	$18.1	$5.9

$3.3	$0.8	$2.5

$4.8	$7.0	($2.2)

$0.11	$0.19	($0.08)

42.2	36.0	6.2

Non-GAAP

Q4 2019	Q4 2018	YoY
Change

$48.7	$37.8	$10.9

$24.4	$18.4	$6.0

$5.8	$2.9	$2.9

$7.1	$3.0	$4.1

$0.17	$0.08	$0.09

42.7	36.2	6.5

WARRANTS IMPACT change in ASU 2019-08

	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	989	2,416	5,143	1,130	9,678
Warrants impact %	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

QUARTERLY REVENUES

Revenues of $48.7 million vs. $37.8 million in prior year, increase of 28.8% YoY and 2.9% QoQ
A global customer accounted for 9.1% of revenues compared to 14.0% in previous year
10 largest accounts represented 41.6% of revenues compared to 57.4% in the previous year

Geographic Revenue Split

Q4 2019Q4 2018

11%	13%

25%

29%

58%

64%

Americas

EMEA

Asia Pacific

Americas

EMEA

Asia Pacific

ANNUAL REVENUES

Revenues of $179.9 million vs. $142.4 million in prior year, increase of 26.3%
A global customer accounted for 12.3% of revenues compared to 17.0% in previous year
10 largest accounts represented 40.4% of revenues compared to 53.8% in the previous year

Geographic Revenue Split

20192018

12%	11%

27%

32%

57%

61%

Americas

EMEA

Asia Pacific

Americas

EMEA

Asia Pacific

PRODUCT AND SERVICES ANNUAL TRENDS

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

System / Ink / Services

10%

11%

13%

45%

42%

37%

45%	47%	50%

2017

2018

2019

System Ink Services

Trends (in $M)

91.4

90.0

80.0

70.0					65.8	65.2
60.0					59.9


51.5	50.5

50.0


40.0

30.0
							23.3

20.0	12.1			16.7


10.0




-
2017		2018		2019

		Services	Ink			System

		Expon. (Services)	Expon. (Ink)		Expon. (System)

QUARTERLY GROSS MARGIN AND OPEX

Non-GAAPgross margin of 50.2% increased from 48.8% in Q4 2018 attributed to decrease in warrants impact
Non-GAAPOperating expenses of $18.6 million increased 20.0% year-over-year

Non GAAP Operating Expenses (% of Revenue)
	Q4 2019	Q4 2018
Research & Development	11.6%	15.6%
Sales & Marketing	17.4%	16.5%
General & Administrative	9.2%	8.9%
Total Operating Expenses	38.2%	41.0%

ANNUAL GROSS MARGIN AND OPEX

Non-GAAPgross margin of 47.9% decreased from 49.8% in 2018 due to less favorable product mix.
Non-GAAPOperating expenses of $68.0 million increased 16.9% year-over-year

Non GAAP Operating Expenses (% of Revenue)
	2019	2018

Research & Development	11.7%	14.7%

Sales & Marketing	17.3%	16.4%

General & Administrative	8.8%	9.7%

Total Operating Expenses	37.8%	40.8%

QUARTERLY P&L KPI

Non-GAAP Operating Income

Non-GAAP Net Income

Non-GAAP diluted EPS

GAAP Net Income

GAAP Diluted EPS

Adjusted EBITA

$ In millions except per share amounts

Q4 2019	Q4 2018

$5.8$2.9

$7.1$3.0

$0.17$0.08

$4.8$7.0

$0.11$0.19

$8.2$5.2

HEADCOUNT TRENDS

Headcount as at December 31st headcount was 547 employees compared to 444 at the end of December 2018

QUARTERLY WARRANTS IMPACT

	Net of
	Warrants
	Impact
Revenues
$48,650
Gross Profit	$24,418
Gross Margin	50.2%
Operating Profit	$5,822
Operating Margin	12.0%
Net Profit	$7,071
Net Margin	14.5%
Diluted EPS	$0.17

$ In thousands except per share amounts

Q4 2019
Warrants		Net of
	Warrants
Impact
	Impact

$1,131	$49,781
$47,293
	$25,549	$22,570
113 BPS	51.3%	47.7%
	$6,953	$6,162
200 BPS	14.0%	13.0%
	$8,202	$6,591
194 BPS	16.5%	13.9%
$0.02	$0.19	$0.16

Q3 2019
Warrants		Net of
	Warrants
Impact
	Impact

$2,429	$49,722
$37,786
	$24,999	$18,436
255 BPS	50.3%	48.8%
	$8,591	$2,943
425 BPS	17.3%	7.8%
	$9,020	$2,953
421 BPS	18.1%	7.8%
$0.05	$0.21	$0.08

Q4 2018
Warrants
Impact
$1,385	$39,171
	$19,821
181 BPS	50.6%
	$4,328
326 BPS	11.0%
	$4,338
326 BPS	11.1%
$0.04	$0.12

ANNUAL WARRANTS IMPACT

	Net of
	Warrants
	Impact
Revenues	$179,865
Gross Profit	$86,145
Gross Margin	47.9%
Operating Profit	$18,177
Operating Margin	10.1%
Net Profit	$19,587
Net Margin	10.9%
Diluted EPS	$0.49

2019
Warrants		Net of
	Warrants
Impact
	Impact

$5,095	$184,960	$142,373
-	$91,240	$70,861
144 BPS	49.3%	49.8%
-	$23,272	$12,710
248 BPS	12.6%	8.9%
-	$24,682	$13,122
245 BPS	13.3%	9.2%
$0.13	$0.62	$0.37

2018
Warrants
Impact
$4,575	$146,948
	$75,436
156 BPS	51.3%
	$17,285
284 BPS	11.8%
	$17,697
283 BPS	12.0%
$0.13	$0.50

$ In thousands except per share amounts

WARRANTS IMPACT AND VESTING

Warrants Impact1

												13.46	14.60

									9.50	10.06	11.04

								8.12
							6.46
				4.93	4.97
2.03	2.97	4.38	4.53
										2.43
2.03	1.41				1.49		1.66	1.39			1.13
0.94		0.39			0.56	0.97
	0.15	0.04


Q4-2016	Q1-2017	Q2-2017	Q3-2017	Q4-2017	Q1-2018	Q2-2018	Q3-2018	Q4-2018	Q1-2019	Q2-2019	Q3-2019	Q4-2019
					Warrants $M	Accumulative $M

Warrants Vesting2

													1.61
											1.20	1.28
										1.11
									1.03

								0.86
					0.51	0.60	0.60

		0.34	0.34	0.34				0.26					0.33
0.17	0.17	0.17			0.17			0.17
		0.09			0.09	0.09	0.09
			-	-		-


Q4-2016	Q1-2017	Q2-2017	Q3-2017	Q4-2017	Q1-2018	Q2-2018	Q3-2018	Q4-2018	Q1-2019	Q2-2019	Q3-2019	Q4-2019
						Full T #M	Full T Accumulative #M

Revenue recognition base impact
Collection base impact

QUARTERLY BALANCE SHEET AND CASH FLOW

Balance Sheet

	Q4 2019	Q3 2019	Q4 2018
Cash & Cash Equivalents	$263.7	$250.4	$127.7
Accounts Recievable	$40.5	$44.9	$22.0
Inventory	$37.5	$34.4	$30.0
Trade Payable	$23.4	$17.3	$16.6
Net Working Capital	$205.8	$259.8	$179.1

$ In millions

Cash From Operating Activities

15.7

11.0

(0.0)

Q4 2018

Q3 2019

Q4 2019

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 of December 31, 2019, 1,612,683 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 $1.1 million during the fourth quarter and $5.1 during the year ended December 31, 2019

Q1 2020 GUIDANCE*

Revenue is expected to be between $47 million to $51 million
Non-GAAPoperating income is expected to be between 2.0% to 6.0% of revenue

*we assume zero impact on revenue and operating margin for the purposes of guidance

OUR VISION

CREATE A BETTER WORLD

WHERE EVERYBODY CAN BOND, DESIGN AND

EXPRESS THEIR IDENTITIES, ONE IMPRESSION AT A TIME

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Kornit Digital Ltd. published this content on 11 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 February 2020 22:22:06 UTC

Market Closed - Nasdaq Other stock markets 04:00:03 2024-04-23 pm EDT			5-day change	1st Jan Change
15.87 ^USD	+1.15%		+0.13%	-17.17%

Feb. 14	Transcript : Kornit Digital Ltd., Q4 2023 Earnings Call, Feb 14, 2024
Feb. 14	Earnings Flash (KRNT) KORNIT DIGITAL Posts Q4 Revenue $56.6M, vs. Street Est of $57.5M	MT

Transcript : Kornit Digital Ltd., Q4 2023 Earnings Call, Feb 14, 2024	Feb. 14
Earnings Flash (KRNT) KORNIT DIGITAL Posts Q4 Revenue $56.6M, vs. Street Est of $57.5M	Feb. 14	MT
Earnings Flash (KRNT) KORNIT DIGITAL Reports Q4 EPS $0.08, vs. Street Est of $-0.01	Feb. 14	MT
Earnings Flash (KRNT) KORNIT DIGITAL Reports Q4 EPS $0.08, vs. Street Est of $-0.01	Feb. 14	MT
Kornit Digital Ltd. Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 14	CI
Kornit Digital Ltd. Provides Earnings Guidance for First Quarter of 2024	Feb. 14	CI
Kornit Digital Ltd. Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Feb. 14	CI
Kornit Digital Ltd. Announces General Availability of Its Field Proven Kornit Apollo	Jan. 29	CI
Kornit Digital Ltd.'s Equity Buyback Plan Extended for additional six months.	Dec. 12	CI
Morgan Stanley Adjusts Price Target on Kornit Digital to $24 From $29, Maintains Overweight Rating	Nov. 09	MT
Craig-Hallum Upgrades Kornit Digital to Buy From Hold, Price Target is $23	Nov. 09	MT
Tranche Update on Kornit Digital Ltd.'s Equity Buyback Plan announced on August 10, 2022.	Nov. 08	CI
Transcript : Kornit Digital Ltd., Q3 2023 Earnings Call, Nov 08, 2023	Nov. 08
Earnings Flash (KRNT) KORNIT DIGITAL Posts Q3 Revenue $59.2M, vs. Street Est of $59.9M	Nov. 08	MT
Kornit Digital Ltd. Provides Revenue Guidance for the Fourth Quarter of 2023	Nov. 08	CI
Kornit Digital Ltd. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 08	CI
Needham Adjusts Price Target on Kornit Digital to $31 From $33, Keeps Buy Rating	23-08-10	MT
Morgan Stanley Upgrades Kornit Digital to Overweight From Equalweight, Calls Stock Drop 'Overreaction,' Keeps Price Target at $29	23-08-10	MT
Tranche Update on Kornit Digital Ltd.'s Equity Buyback Plan announced on August 10, 2022.	23-08-09	CI
Kornit Digital's Q2 Non-GAAP Net Loss Narrows, Revenue Falls	23-08-09	MT
Transcript : Kornit Digital Ltd., Q2 2023 Earnings Call, Aug 09, 2023	23-08-09
Earnings Flash (KRNT) KORNIT DIGITAL Posts Q2 Revenue $56.2M, vs. Street Est of $56.8M	23-08-09	MT
Kornit Digital Ltd. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	23-08-09	CI
Kornit Digital Ltd. Provides Earnings Guidance for the Third Quarter of 2023	23-08-09	CI
Kornit Digital Ltd.'s Equity Buyback Plan Extended for additional six months.	23-08-08	CI

	1st Jan change	Capi.
KORNIT DIGITAL LTD.	-17.17%	757M
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VALMET OYJ	-4.60%	4.91B
SUZHOU MAXWELL TECHNOLOGIES CO., LTD.	-16.98%	4.13B
KRONES AG	+10.91%	4.19B
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IHI CORPORATION	+31.22%	3.76B
KADANT INC.	+3.28%	3.39B

Kornit Digital Ltd.

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KRNT

IL0011216723

Industrial Machinery & Equipment

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