Kornit Digital Reports Second Quarter 2024 Results

Rhea-AI Summary

Kornit Digital (NASDAQ: KRNT) reported Q2 2024 results with revenues of $48.6 million, in line with previous guidance. The company saw GAAP net loss of $4.9 million and non-GAAP net income of $1.1 million. Notably, Kornit generated positive cash flow from operations and experienced year-over-year growth in both impressions and consumables.

The company's All-Inclusive Click (AIC) program and Apollo system continue to gain traction, with multiple orders added to the backlog. Kornit is also piloting the AIC model on the Atlas MAX system for screen replacement customers. For Q3 2024, Kornit expects revenues between $48-52 million and an adjusted EBITDA margin of 1-6%.

Positive

• Generated positive cash flow from operations in Q2 2024
• Year-over-year growth in both impressions and consumables
• Non-GAAP net income of $1.1 million, compared to a loss in Q2 2023
• Improved GAAP gross profit margin to 45.8% from 33.3% year-over-year
• Reduced GAAP operating expenses by 16.7% compared to Q2 2023
• Multiple new orders for Apollo system, including four on the AIC model

Negative

• Total revenue decreased to $48.6 million from $56.2 million year-over-year
• GAAP net loss of $4.9 million in Q2 2024
• Adjusted EBITDA loss of $1.6 million in Q2 2024

Insights

Financial Analyst

Kornit Digital's Q2 2024 results present a mixed picture. While revenues of $48.6 million aligned with guidance, they decreased from $56.2 million in the prior year. However, the company showed improvement in profitability metrics. The non-GAAP gross profit margin increased to 48.6% from 36.1% and non-GAAP operating expenses decreased by 17.9%.

The shift to non-GAAP net income of $1.1 million from a loss of $7.4 million year-over-year is noteworthy. The adjusted EBITDA margin, while still negative at -3.4%, improved significantly from -19.1%. This suggests better cost management and operational efficiency.

The Q3 2024 guidance of $48-52 million in revenue and 1-6% adjusted EBITDA margin indicates cautious optimism. Investors should monitor the company's ability to capitalize on the shift to on-demand production in the fashion industry, particularly through its AIC program and Apollo system.

Market Research Analyst

Kornit's Q2 results reflect the ongoing transformation in the fashion industry towards on-demand production. The growth in impressions and consumables, despite muted system sales, indicates a shift in customer behavior. This suggests that existing clients are increasing utilization of their current Kornit systems rather than investing in new ones.

The pilot of the all-inclusive click (AIC) program and the Apollo system gaining traction is a positive sign. The decision to extend the AIC model to the Atlas MAX system for screen replacement customers shows Kornit's adaptability to market demands. This could potentially open up new revenue streams and market segments.

However, the lower overall revenue compared to the previous year highlights the challenges in the current market environment. The company's ability to navigate these challenges while positioning itself for future growth will be important for long-term success.

Tech Industry Expert

Kornit's Q2 results underscore the company's strategic pivot towards a more service-oriented business model. The introduction of the all-inclusive click (AIC) program represents a shift from traditional hardware sales to a recurring revenue model. This approach could provide more stable and predictable cash flows in the long term.

The growth in impressions and consumables, coupled with multiple Apollo orders, suggests increasing adoption of Kornit's technology. The expansion of the AIC model to the Atlas MAX system indicates confidence in this strategy and could accelerate market penetration in the screen replacement segment.

However, the decrease in systems revenue highlights the challenges of this transition period. The company's ability to balance the decline in hardware sales with growth in consumables and services will be crucial. Investors should closely monitor the uptake of the AIC program and its impact on revenue and margins in coming quarters.

• Second quarter revenues of $48.6 million, in line with previous guidance
  
• Second quarter GAAP net loss of $4.9 million; non-GAAP net income of $1.1 million
• Generated positive cash flow from operations for the second quarter of 2024
• Both impressions and consumables grew year-over-year during the second quarter
• Interest in our pilot of the all-inclusive click (“AIC”) program and our Apollo system remains strong, with multiple orders added to our backlog in second quarter
  

ROSH-HA`AYIN, Israel, Aug. 07, 2024 (GLOBE NEWSWIRE) -- Kornit Digital Ltd. (“Kornit” or the “Company”) (Nasdaq: KRNT), a worldwide market leader in sustainable, on-demand, digital fashion^X and textile production technologies, today reported results for the second quarter ended June 30, 2024.

“We are witnessing a pivotal shift to on-demand production in the fashion industry, where consumers are demanding both increased variety and faster delivery.” said Ronen Samuel, Kornit’s Chief Executive Officer. He added, “While the positive impact of these trends on our systems sales remains muted, we again saw growth in impressions and consumables. This supports our view that our customers continue to digest available capacity.”

Mr. Samuel continued, “In the second quarter, we also received several additional Apollo orders, including four on our AIC model. Given the strong initial feedback and traction we have seen with our AIC model, we made the decision to begin piloting the model on the Atlas MAX system for screen replacement customers.” He concluded, “We look forward to updating the investor community on our long-term business plans and capital allocation strategy at our investor event planned on September 10th.”

Second Quarter 2024 Results of Operations

• Total revenue for the second quarter of 2024 was $48.6 million compared with $56.2 million in the prior year period, due primarily to lower systems revenues.
  
  
• GAAP gross profit margin for the second quarter of 2024 was 45.8% compared with 33.3% in the prior year period. On a non-GAAP basis, gross profit margin was 48.6% compared with 36.1% in the prior year period.
  
  
• GAAP operating expenses for the second quarter of 2024 were $33.0 million compared with $39.6 million in the prior year period. On a non-GAAP basis, operating expenses decreased by 17.9% to $28.0 million compared with the prior year period.
  
  
• GAAP net loss for the second quarter of 2024 was $4.9 million, or ($0.10) per basic share, compared with net loss of $14.3 million, or ($0.29) per basic share, for the second quarter of 2023.
  
  
• Non-GAAP net income for the second quarter of 2024 was $1.1 million, or $0.02 per diluted share, compared with non-GAAP net loss of $7.4 million, or ($0.15) per basic share, for the second quarter of 2023.
  
  
• Adjusted EBITDA loss for the second quarter of 2024 was $1.6 million compared with adjusted EBITDA loss of $10.7 million for the second quarter of 2023. Adjusted EBITDA margin for the second quarter of 2024 was -3.4% compared with -19.1% for the second quarter of 2023.
  

Third Quarter 2024 Guidance

For the third quarter of 2024, the Company expects revenues to be in the range of $48 million to $52 million and adjusted EBITDA margin between 1% to 6%.

Second Quarter Earnings Conference Call Information

The Company will host a conference call today at 8:30 a.m. ET, or 3:30 p.m. Israel time, to discuss the results, followed by a question-and-answer session with the investor community.

A live webcast of the call can be accessed at ir.kornit.com. To access the call, participants may dial toll-free at 1-800-717-1738 or 1-646-307-1865. The toll-free Israeli number is 972 3 384 8161. The conference confirmation code is 71703.

To listen to a replay of the conference call, dial toll-free 1-844-512-2921 or 1-412-317-6671 (international) and enter confirmation code 1171703. The telephonic replay will be available approximately three hours after the completion of the live call until 11:59 pm ET on August 21, 2024. The call will also be available for replay via the webcast link on Kornit’s Investor Relations website.

About Kornit Digital

Kornit Digital (NASDAQ: KRNT) is a worldwide market leader in sustainable, on-demand, digital fashion^x and textile production technologies. The Company is writing the operating system for fashion with end-to-end solutions including digital printing systems, inks, consumables, and an entire global ecosystem that manages workflows and fulfillment. Headquartered in Israel with offices in the USA, Europe, and Asia Pacific, Kornit Digital serves customers in more than 100 countries and states worldwide. To learn more about how Kornit Digital is boldly transforming the world of fashion and textiles, visit www.kornit.com/.

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 and severity of adverse macro-economic headwinds that were caused by inflationary pressures and higher interest rates, which have impacted, and may continue to impact, in an adverse manner, the Company’s operations, financial position and cash flows, in part due to the adverse impact on the Company’s customers and suppliers; the Company’s degree of success in developing, introducing and selling new or improved products and product enhancements including specifically the Company’s Poly Pro and Presto products, and the Company’s Apollo direct-to-garment platform; the extent of the Company’s ability to consummate sales to large accounts with multi-system delivery plans; the degree of the Company’s ability to fill orders for its systems and consumables; the extent of the Company’s ability to increase sales of its systems, ink and consumables; the extent of the Company’s ability to leverage its global infrastructure build-out; the development of the market for digital textile printing; the availability of alternative ink; competition; sales concentration; changes to the Company’s relationships with suppliers; the extent of the Company’s 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, 2023, filed with the SEC on March 28, 2024. Any forward-looking statements in this press release are made as of the date hereof, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Discussion Disclosure

The Company presents certain non-GAAP financial measures, in this press release and in the accompanying conference call to discuss the Company’s quarterly results. These non-GAAP financial measures reflect adjustments to corresponding GAAP financial measures in order to exclude the impact of the following: share-based compensation expenses; amortization of intangible assets; restructuring expenses; foreign exchange differences associated with ASC 842; and non-cash deferred tax income.

The Company defines “Adjusted EBITDA” as non-GAAP operating income (loss), which reflects the adjustments described in the preceding paragraph, as further adjusted to exclude depreciation expense.

The purpose of the foregoing non-GAAP financial measures is to convey the Company’s performance exclusive of non-cash charges and other items that are considered by management to be outside of the Company’s 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 the Company’s business and make operating decisions, and the Company believes that they are useful to investors as a consistent and comparable measure of the ongoing performance of the Company’s business. The Company’s 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 the Company’s 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.

The reconciliation tables included below present a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures.

Investor Contact:
Jared Maymon
Global Head of Investor Relations & Strategic Finance
Jared.Maymon@Kornit.com

KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
		June 30,			December 31,
		2024			2023
		(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	22,522		$	39,605
Short-term bank deposit			243,396			235,600
Marketable securities			160,121			57,292
Trade receivables, net			79,461			93,632
Inventory			70,595			67,712
Other accounts receivable and prepaid expenses			27,062			28,546
Total current assets			603,157			522,387
LONG-TERM ASSETS:
Marketable securities			128,396			223,203
Deposits and other long-term assets			10,727			8,209
Severance pay fund			286			283
Property, plant and equipment, net			47,710			50,905
Operating lease right-of-use assets			19,697			23,782
Intangible assets, net			6,623			7,647
Goodwill			29,164			29,164
Total long-term assets			242,603			343,193
Total assets			845,760			865,580
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables			4,794			6,936
Employees and payroll accruals			11,865			12,121
Deferred revenues and advances from customers			1,486			2,158
Operating lease liabilities			3,270			5,073
Other payables and accrued expenses			22,152			23,814
Total current liabilities			43,567			50,102
LONG-TERM LIABILITIES:
Accrued severance pay			1,021			1,080
Operating lease liabilities			15,676			18,533
Other long-term liabilities			138			198
Total long-term liabilities			16,835			19,811
SHAREHOLDERS' EQUITY			785,358			795,667
Total liabilities and shareholders' equity		$	845,760		$	865,580

KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2024				2023				2024				2023
	(Unaudited)								(Unaudited)
Revenues
Products	$	34,366			$	40,083			$	63,379			$	71,986
Services		14,255				16,116				29,018				31,991
Total revenues		48,621				56,199				92,397				103,977
Cost of revenues
Products		13,271				22,620				28,962				42,999
Services		13,066				14,886				27,012				29,213
Total cost of revenues		26,337				37,506				55,974				72,212
Gross profit		22,284				18,693				36,423				31,765
Operating expenses:
Research and development, net		10,472				12,907				21,824				25,989
Sales and marketing		14,976				18,158				28,772				33,341
General and administrative		7,532				8,541				14,809				17,489
Total operating expenses		32,980				39,606				65,405				76,819
Operating loss		(10,696	)			(20,913	)			(28,982	)			(45,054	)
Financial income, net		6,435				7,018				11,781				12,422
Loss before taxes on income		(4,261	)			(13,895	)			(17,201	)			(32,632	)
Taxes on income		648				430				907				624
Net loss	$	(4,909	)		$	(14,325	)		$	(18,108	)		$	(33,256	)
Basic loss per share	$	(0.10	)		$	(0.29	)		$	(0.38	)		$	(0.67	)
Weighted average number of shares
used in computing basic net loss per share		47,535,212				49,554,383				47,573,334				49,720,453
Diluted loss per share	$	(0.10	)		$	(0.29	)		$	(0.38	)		$	(0.67	)
Weighted average number of shares
used in computing diluted net loss per share		47,535,212				49,554,383				47,573,334				49,720,453

KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2024				2023				2024				2023
		(Unaudited)								(Unaudited)
Revenues		$	48,621			$	56,199			$	92,397			$	103,977
GAAP cost of revenues		$	26,337			$	37,506			$	55,974			$	72,212
Cost of product recorded for share-based compensation (1)			(490	)			(672	)			(992	)			(1,179	)
Cost of service recorded for share-based compensation (1)			(453	)			(493	)			(872	)			(844	)
Intangible assets amortization on cost of product (2)			(264	)			(263	)			(529	)			(526	)
Intangible assets amortization on cost of service (2)			(160	)			(160	)			(320	)			(320	)
Restructuring expenses (3)			-				-				(914	)			(89	)
Non-GAAP cost of revenues		$	24,970			$	35,918			$	52,347			$	69,254
GAAP gross profit		$	22,284			$	18,693			$	36,423			$	31,765
Gross profit adjustments			1,367				1,588				3,627				2,958
Non-GAAP gross profit		$	23,651			$	20,281			$	40,050			$	34,723
GAAP operating expenses		$	32,980			$	39,606			$	65,405			$	76,819
Share-based compensation (1)			(4,926	)			(5,385	)			(9,453	)			(9,772	)
Intangible assets amortization (2)			(87	)			(152	)			(175	)			(340	)
Restructuring expenses (3)			-				-				(757	)			(206	)
Non-GAAP operating expenses		$	27,967			$	34,069			$	55,020			$	66,501
GAAP Financial income, net		$	6,435			$	7,018			$	11,781			$	12,422
Foreign exchange losses associated with ASC 842			(269	)			(121	)			116				(497	)
Non-GAAP Financial income, net		$	6,166			$	6,897			$	11,897			$	11,925
GAAP Taxes on income		$	648			$	430			$	907			$	624
Non-cash deferred tax income			86			$	102				173			$	323
Non-GAAP Taxes on income		$	734			$	532			$	1,080			$	947
GAAP net loss		$	(4,909	)		$	(14,325	)		$	(18,108	)		$	(33,256	)
Share-based compensation (1)			5,869				6,550				11,317				11,795
Intangible assets amortization (2)			511				575				1,024				1,186
Restructuring expenses (3)			-				-				1,671				295
Foreign exchange losses associated with ASC 842			(269	)			(121	)			116				(497	)
Non-cash deferred tax income			(86	)			(102	)			(173	)			(323	)
Non-GAAP net income (loss)		$	1,116			$	(7,423	)		$	(4,153	)		$	(20,800	)
GAAP diluted loss per share		$	(0.10	)		$	(0.29	)		$	(0.38	)		$	(0.67	)
Non-GAAP diluted income (loss) per share		$	0.02			$	(0.15	)		$	(0.09	)		$	(0.42	)
Weighted average number of shares
Shares used in computing GAAP diluted net loss per share			47,535,212				49,554,383				47,573,334				49,720,453
Shares used in computing Non-GAAP diluted net loss per share			49,898,775				49,554,383				47,573,334				49,720,453
(1) Share-based compensation
	Cost of product revenues	$	490			$	672			$	992			$	1,179
	Cost of service revenues		453				493				872				844
	Research and development		1,376				1,601				2,671				2,952
	Sales and marketing		1,784				1,944				3,366				3,307
	General and administrative		1,766				1,840				3,416				3,513
		$	5,869			$	6,550			$	11,317			$	11,795
(2) Intangible assets amortization
	Cost of product revenues	$	264			$	263			$	529			$	526
	Cost of service revenues		160				160				320				320
	Sales and marketing		87				152				175				340
		$	511			$	575			$	1,024			$	1,186
(3) Restructuring expenses
	Cost of product revenues	$	-			$	-			$	865			$	89
	Cost of service revenues		-				-				49				-
	Research and development		-				-				235				20
	Sales and marketing		-				-				190				186
	General and administrative		-				-				332				-
		$	-			$	-			$	1,671			$	295

KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2024				2023				2024				2023
	(Unaudited)								(Unaudited)
Cash flows from operating activities:
Net loss	$	(4,909	)		$	(14,325	)		$	(18,108	)		$	(33,256	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,191				3,654				6,515				7,527
Fair value of warrants deducted from revenues		(313	)			3,332				3,273				5,676
Share-based compensation		5,869				6,550				11,317				11,795
Amortization of premium and accretion of discount on marketable securities, net		16				202				9				525
Realized loss on sale and redemption of marketable securities		-				(43	)			-				(3	)
Change in operating assets and liabilities:
Trade receivables, net		1,266				(11,248	)			14,171				(16,856	)
Other accounts receivables and prepaid expenses		970				(1,682	)			1,484				(766	)
Inventory		(3,868	)			4,963				(3,964	)			1,940
Operating leases right-of-use assets and liabilities, net		(488	)			(555	)			(575	)			(1,012	)
Deposits and other long term assets		(511	)			(851	)			(1,219	)			(1,878	)
Trade payables		1,832				(225	)			(1,933	)			(1,702	)
Employees and payroll accruals		1,674				1,752				522				2,489
Deferred revenues and advances from customers		(364	)			(2,199	)			(672	)			(3,237	)
Other payables and accrued expenses		123				(4,378	)			(2,190	)			(38	)
Accrued severance pay, net		(30	)			(161	)			(62	)			(62	)
Other long - term liabilities		26				(330	)			(60	)			(690	)
Net cash provided by (used in) operating activities	$	4,484			$	(15,544	)		$	8,508			$	(29,548	)
Cash flows from investing activities:
Purchase of property, plant and equipment	$	(1,439	)		$	(1,791	)		$	(2,723	)		$	(5,069	)
Proceeds from (investment in) short-term bank deposits, net		16,601				(219,997	)			(7,796	)			54,935
Proceeds from sales and redemption of marketable securities		-				1,250				3,494				5,250
Proceeds from maturities of marketable securities		24,581				7,680				35,879				11,252
Investment in marketable securities		(26,602	)			(8,911	)			(44,619	)			(18,935	)
Net cash provided by (used in) investing activities	$	13,141			$	(221,769	)		$	(15,765	)		$	47,433
Cash flows from financing activities:
Exercise of employee stock options	$	7			$	53			$	7			$	95
Payments related to shares withheld for taxes		(184	)			(302	)			(778	)			(437	)
Repurchase of ordinary shares		(1,427	)			(14,066	)			(9,055	)			(20,818	)
Net cash used in financing activities	$	(1,604	)		$	(14,315	)		$	(9,826	)		$	(21,160	)
Increase (decrease) in cash and cash equivalents	$	16,021			$	(251,628	)		$	(17,083	)		$	(3,275	)
Cash and cash equivalents at the beginning of the period		6,501				352,950				39,605				104,597
Cash and cash equivalents at the end of the period	$	22,522			$	101,322			$	22,522			$	101,322
Non-cash investing and financing activities:
Purchase of property and equipment on credit		105				219				105				219
Inventory transferred to be used as property and equipment and long term assets		455				-				1,401				-
Property, plant and equipment transferred to be used as inventory		166				-				320				734
Lease liabilities arising from obtaining right-of-use assets		338				(550	)			(1,408	)			5,487

KORNIT DIGITAL LTD.
AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDA
(U.S. dollars in thousands, except share and per share data)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2024				2023				2024				2023
		(Unaudited)								(Unaudited)
GAAP Revenues		$	48,621			$	56,199			$	92,397			$	103,977
GAAP Net Loss			(4,909	)			(14,325	)			(18,108	)			(33,256	)
Taxes on income			648				430				907				624
Financial income			(6,435	)			(7,018	)			(11,781	)			(12,422	)
Share-based compensation			5,869				6,550				11,317				11,795
Intangible assets amortization			511				575				1,024				1,186
Restructuring expenses			-				-				1,671				295
Non-GAAP Operating Loss			(4,316	)			(13,788	)			(14,970	)			(31,778	)
Depreciation			2,680				3,079				5,491				6,341
Adjusted EBITDA		$	(1,636	)		$	(10,709	)		$	(9,479	)		$	(25,437	)

FAQ

What were Kornit Digital's (KRNT) Q2 2024 revenue and earnings?

Kornit Digital reported Q2 2024 revenues of $48.6 million, with a GAAP net loss of $4.9 million ($0.10 per basic share) and non-GAAP net income of $1.1 million ($0.02 per diluted share).

How did Kornit's (KRNT) Q2 2024 performance compare to the previous year?

Kornit's Q2 2024 revenue of $48.6 million decreased from $56.2 million in Q2 2023. However, the company improved its GAAP gross profit margin to 45.8% from 33.3% and reduced operating expenses by 16.7% year-over-year.

What is Kornit Digital's (KRNT) revenue guidance for Q3 2024?

Kornit Digital expects revenues for Q3 2024 to be in the range of $48 million to $52 million, with an adjusted EBITDA margin between 1% to 6%.

Did Kornit Digital (KRNT) see growth in any areas during Q2 2024?

Yes, Kornit Digital reported year-over-year growth in both impressions and consumables during Q2 2024, despite lower system revenues.