Kornit Digital : Q4 2020 Earnings Call –Supporting Slides

KORNIT DIGITAL

(NASDAQ: KRNT)

Q4 2020 EARNINGS CALL SUPPORTING SLIDES

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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, or SEC, 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 and may negatively impact once again, 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. Please see the reconciliation table that appears among the financial tables in our earnings release being issued today, which earnings release is attached as Exhibit 99.1 to our report of foreign private issuer being furnished to the SEC today, which reconciliation table is incorporated by reference in this presentation.

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.

OUR VISION

CREATE A BETTER WORLD

WHERE EVERYBODY CAN BOND, DESIGN AND EXPRESS THEIR IDENTITIES, ONE IMPRESSION AT A TIME

3 | © All rights reserved Kornit Digital 2019

ON TODAY'S CALL

BUSINESS HIGHLIGHTS

RONEN SAMUEL

CEO

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• • Outstanding Fourth Quarter significantly exceeding guidance for top line and profitability

• • Transformative year in Kornit's history

  • • Inflection point in the textile industry

• • More confident than ever in ability to achieve management goal of becoming a $500 million revenue run rate business at the end of 2023, ahead of plan

• • Total revenue of $72.3 million, net of $1.8 million in warrants related to a global strategic account

  • • Year-over-year growth of approximately 49%

  • • Record of $34.3 cash flow from operations

EXCEEDED EXPECTATION FOR FOURTH QUARTER

• • E-comm and online marketplaces continue to boom across verticals

• • Healthy mix of new vs. existing accounts

• • Presto is a game-changer, engagement with manufacturers for top fashion brands continues to grow

• • Americas sets new record highs, good quarter in EMEA, expecting strong APAC recovery in 2021

• • Key and regional accounts adding multiple Atlases, Vulcans and AVHDs

• • Enabled customers to have an incredibly successful peak season

• • Staggering year-over-year growth of recurring consumables business

• • Services outperform on growth and profitability

  • • Proud with execution of customer success teams

• • New business line leveraging strategic foundation of Custom Gateway:

  • • Experiencing huge interest from brands and fulfillers

  • • Robust pipeline across regions

  • • Huge opportunity to build incremental recurring business model

STARTING 2021 STRONGER THAN EVER

• • Accelerating industry tailwinds

• • Impressive backlog and robust pipeline

• • Significant strategic initiatives in 2021:

  • - Launch of powerful new products

  • - Launch breakthrough automation technology

  • - Introduction of ground-breaking 3D textile application bringing unique embroidery, high density printing, and vinyl heat transfer effects - significantly expanding our addressable market

  • - Scale new software workflow business line

  • - Execute on backlog of massive global expansions

  • - Engage in exciting projects with leading brands

  • - Expand footprint, penetrate new markets

STARTING 2021 STRONGER THAN EVER

More confident than ever in our ability to execute on the massive opportunity ahead of us

Kornit's initiatives will further disrupt the industry fueling

growth and profitability well beyond 2021

WELCOME

Alon Rozner

ALON ROZNER

CFO

FINANCIALS HIGHLIGHTS

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GAAP	Non-GAAP
Q4 2020	Q4 2019	YoY Change	Q4 2020	Q4 2019	YoY Change
Total Revenue	$72.3	$48.7	$23.6	$72.3	$48.7	$23.6
Gross Profit	$36.9	$24.0	$12.9	$37.5	$24.4	$13.1
Operating Income	$9.0	$3.3	$5.7	$11.8	$5.8	$6.0
Net Income	$5.9	$4.8	$1.1	$11.5	$7.1	$4.4
Diluted EPS	$0.12	$0.11	$0.01	$0.24	$0.17	$0.07
Diluted Shares (M)	47.2	42.2	5.0	47.6	42.7	4.9

$ in millions except per share and share amounts

Q4 2020	Q3 2020	Q4 2019
Net of Warrants Warrants Impact Impact K$/BPS/EPS	Net of Warrants Warrants ImpactImpactK$/BPS/EPS	Net of Warrants Impact Warrants Impact K$/BPS/EPS
Revenues Gross Profit Gross Margin Operating Profit Operating Margin Net Profit Net Margin Diluted EPS	$72,291 $1,801 $74,092 $37,456 $39,257 51.8% $11,800 16.3% 117 BPS 203 BPS 53.0% $13,601 18.4% $11,543 $13,344 16.0% $0.24 204 BPS 18.0% $0.04 $0.28	$57,392 $2,158 $59,550 $27,619$29,777 48.1% 188 BPS 50.0% $6,460 $8,618 11.3% 322 BPS 14.5% $7,729 $9,887 13.5% $0.18 314 BPS 16.6% $0.05 $0.23	$48,650 $1,131 $49,781 $24,418 $25,549 50.2% 113 BPS 51.3% $5,822 $6,953 12.0% 200 BPS 14.0% $7,071 $8,202 14.5% $0.17 194 BPS 16.5% $0.02 $0.19

$ in thousands except per share amounts

QUARTERLY REVENUES

• • Service revenues of $10.9 million accounting for 15.1% of revenues compared to $6.4 in prior year

• • Revenues of $72.3 million vs. $48.7 million in prior year, an increase of 48.6% YoY and an increase of 26.0% QoQ

• • 10 largest accounts represented 62.1% of revenues compared to 41.6% in prior year

Q4 2020 Geographic Segments %

Geographic Revenue Split

5%

AmericasEMEAAsia Pacific

Q4 2019 Geographic Segments %

11%

AmericasEMEAAsia Pacific

QUARTERLY GROSS MARGIN AND OPEX

• • Non-GAAP gross margin of 51.8% increased from 50.2% in Q4 2019

• • Non-GAAP operating expenses of $25.7 million increased 38.0% year over year

Q4 2020	Q4 2019
Research & Development	12.1% 11.6%
Sales & Marketing	14.2% 17.4%
General & Administrative	9.2% 9.2%
Total Operating Expenses	35.5% 38.2%

Non-GAAP Operating Income (Loss)

Non-GAAP Net Income (Loss)

Non-GAAP Diluted EPS

GAAP Net Income (Loss)

GAAP Diluted EPS

Adjusted EBITDA

$ in millions except per share amounts

Q4 2020 Q3 2020 Q4 2019
Cash & Cash Equivalents Accounts Recievable Inventory Trade Payable Net Working Capital	$435.9	$405.3	$263.7
$51.6	$49.7	$40.5
$52.5	$46.3	$37.5
$32.0	$24.8	$23.4
$387.9	$388.7	$207.7

$ in millions

$ in millions

Y2020	Y2019
Net of WarrantsWarrants Impact Impact K$/BPS/EPS	Net of WarrantsWarrants Impact Impact K$/BPS/EPS
Revenues Gross Profit Gross Margin Operating Profit Operating Margin Net Profit Net Margin Diluted EPS	$193,331 $5,366 $198,697 $90,248 $95,614 46.7% $5,218 2.7% 144 BPS 263 BPS 48.1% $10,584 5.3% $9,037 $14,403 4.7% $0.21 257 BPS 7.2% $0.12 $0.33	$179,866 $86,146 47.9% $18,178 10.1% $19,588 10.9% $0.49	$5,094 144 BPS 248 BPS 245 BPS $0.13 $184,960 $91,240 49.3% $23,272 12.6% $24,682 13.3% $0.62

$ in thousands except per share amounts

* Revenue recognition base impact ** Collection base impact *** During Q3 2,162,463 of the warrants were exercised

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 December 31, 2020, 659,736 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 $1.8 million during the fourth quarter of 2020 and $1.1 million during the fourth quarter of 2019 ($5.4 million during the year ended December 31, 2020)

Q1 2021 GUIDANCE*

• • Revenue is expected to be between $61.0 million to $65.0 million

• • Non-GAAP operating income is expected to be between 8% to 10% of revenue

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