Kornit Digital Reports 2016 Second Quarter Results

Highlights

• Second quarter 2016 revenues of $24.0 million, an increase of 12.6% over the prior-year period.
• Second quarter GAAP net loss of $0.1 million, or net loss of less than $0.01 per diluted share.
• Second quarter non-GAAP net income of $0.7 million, or $0.02 per diluted share.
• GAAP gross margin of 48.8%, an increase of 172 basis points over the prior year.
• Non-GAAP gross margin of 49.5%, an increase of 187 basis points over the prior year.
• Completed the acquisition of SPSI’s digital printing assets.  

ROSH-HA`AYIN, Israel, Aug. 02, 2016 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (NASDAQ:KRNT), a leading provider of digital printing solutions for the global printed textile industry, today reported results for the second quarter ended June 30, 2016.

Revenues for the second quarter of 2016 increased 12.6% to $24.0 million, compared to the prior year period of $21.3 million.  Higher sales were attributable to growth throughout the company’s product offerings, including systems sold and ink.

The Company reported a GAAP net loss of $0.1 million, or $0.00 per diluted share, compared to net earnings of $0.7 million, in the second quarter of 2015. On a non-GAAP basis, net income in the second quarter of 2016 was $0.7million, or $0.02 per diluted share, compared to prior-year net income of $2.4 million.

During the quarter, the Company had several notable business updates. In July 1, 2016 Kornit acquired the digital direct-to-garment printing assets of SPSI, Inc., one its North American distributors in an effort to improve market reach and deepen relationships with multiple large accounts.  The company also announced the hiring of Dr. Nuriel Amir, Ph.D., Chief Technology Officer and Gilad Yron, Executive Vice President of Global Business.  Additionally, the Company attended two trade shows during the second quarter, resulting in new orders and a number of potential new customers. 

Gabi Seligsohn, Kornit Digital’s Chief Executive Officer commented, “We are pleased with the ongoing growth we have seen in the first half of 2016. We are continuing to ramp up our large, undisclosed customer and are seeing a significant increase in sales with multiple large accounts within the United States which we expect to continue well into the second half of the year.”

Seligsohn continued, “We are committed to maintaining strong rates of growth and to building a highly capable operating infrastructure.  To that end, the very successful onboard of both Gilad, as head of global business, and Nuriel, as our CTO, will allow us to combine deeper customer and partner relationships with an exciting long term product roadmap. We are also very pleased with the process of integrating SPSI’s business with our North American operation. As previously communicated, we will continue to layer on operating expenses in several parts of the organization during the balance of the year to develop a stronger platform.  Adoption of our systems and product offerings is continuing to increase throughout the marketplace and these investments position us to capture an acceleration of growth in the second half of 2016.  Over time, we believe these investments will drive the benefits of scale and ensure a strong level of execution for our customers.”

Second Quarter 2016 Results of Operations
In the second quarter of 2016, Kornit reported revenues of $24.0 million, an increase of 12.6% compared with the prior-year level of $21.3 million. Higher sales were the result of higher volume of systems sold and ink.

GAAP second quarter gross profit was $11.7 million, compared with $10.0 million, in the prior-year. On a Non-GAAP basis gross profit in the second quarter was $11.9 million, or 49.5% of sales, compared with $10.1 million, or 47.6% of sales in the prior-year.  Higher gross margins primarily reflected a favorable sales mix of high throughput systems, and an increased contribution from ink and consumables during the current period.

GAAP total operating expenses in the second quarter were $11.6 million, compared to $8.9 million in the prior period. On a Non-GAAP basis operating expenses in the second quarter increased to $10.9 million, or 45.4% of sales, compared to $7.4 million, or 34.7% of sales in the prior year. The increase in total operating expenses was consistent with the investment strategy previously discussed, and increased headcount in our research and development department.

Second quarter GAAP research and development expenses were $4.1 million, compared to the prior-year period of $2.7 million. Second quarter non-GAAP research and development expenses were $4.0 million, or 16.8% of sales, compared to $2.5 million, or 11.9% of sales in the prior-year. We expect to have elevated research and development costs for the balance of the year.

GAAP second quarter operating income was $0.1 million, compared to the prior year period profit of $1.1 million. Non-GAAP operating income in the second quarter decreased to $1.0 million, compared to $2.7 million in the prior year. As a percent of sales, Non-GAAP operating margin for the second quarter was 4.0% of sales, compared with 12.9% of sales in the prior year period. 

The company reported second quarter GAAP net loss of $0.1 million, or net loss of $0.00 per diluted share, compared to net income of $0.7 million in the second quarter of 2015.   On a Non-GAAP basis, net income for the second quarter of 2016 were $0.7 million, or $0.02 per diluted share, compared to $2.4 million in the prior year period.

Balance Sheet and Cash Flow
At June 30, 2016, the Company had cash and cash equivalents, bank deposits and marketable securities of $66.2 million, and no long-term debt. Cash flow used in operation activity for the first half of 2016 were $6.8 million, primarily due to the increase of inventories and accounts receivables.

Third Quarter 2016 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.

Conference Call Information
Gabi Seligsohn, the Company’s Chief Executive Officer, and Guy Avidan, the Company’s Chief Financial Officer, will host a conference call on the same day 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 1-877-419-6600 or +1-719-325-4750 (international). The toll-free Israeli number is 1 80 925 8243. The confirmation code is 8140279.

To listen to a telephonic replay of the conference call, dial toll-free 1-877-870-5176 or +1-858-384-5517 (international) and enter confirmation code 8140279. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, August 2, 2016, and will last through 11:59 p.m. ET August 16, 2016.  The call will also be available for replay via the webcast link on Kornit’s 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: our success in developing, introducing and selling new or improved products and product enhancements, our ability to consummate sales to large accounts with multi-system delivery plans, such as our Storm Hexa, our ability to leverage our global infrastructure build-out, the development of the market for digital textile printing, availability of alternative ink, competition, sales concentration, changes to our relationships with suppliers, our success in marketing, and those factors referred to under "Risk Factors" in the company's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on March 17, 2016. 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 acquisition related expenses, share-based compensation expenses and amortization of acquired intangible assets. The purpose of such adjustments is to give 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 develops, designs and markets innovative digital printing solutions for the global printed textile industry. Kornit’s solution includes its proprietary digital printing systems, ink and other consumables, associated software and value added services. Kornit’s vision is to revolutionize the textile industry by facilitating the transition from analog processes that have not evolved for decades to digital methods of production that address contemporary supply, demand and environmental dynamics. Kornit is a global company headquartered in Rosh-Ha`Ayin, Israel, with U.S. offices in Mequon, Wisconsin and additional sales, support and marketing offices in Germany and Hong Kong.