Highlights
- Second-quarter 2015 sales of $21.3 million, an increase of 35.1% over the prior year
- Non-GAAP operating margin of 12.9%, up 740 basis points year-over-year.
- Second quarter non-GAAP net income of $2.4 million, or $0.07 per diluted share; GAAP net income of $0.7 million, or $0.02 per diluted share.
- Major customer places order for third Allegro; first two units running full scale production
- Successful launch of Neopigment Pure at multiple key customer sites
ROSH-HA'AYIN, Israel, Aug. 4, 2015 (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 and the six month period ended June 30, 2015.
Non-GAAP net income in the second quarter of 2015 was $2.4 million, or $0.07 per diluted share on sales of $21.3 million, compared to prior-year net income of $0.6 million, on sales of $15.7 million. On a GAAP basis, the Company reported net income of $0.7 million, or $0.02 per diluted share, compared to net income of $0.4 million, in the second quarter of 2014.
Sales in the quarter increased 35.1% to $21.3 million, as a result of continued growth in the direct-to-garment market (DTG), and some initial sales of Allegro roll-to-roll systems. Gabi Seligsohn, Kornit Digital's Chief Executive Officer commented, "During the second quarter we achieved two major product milestones. A major customer placed a third order for our roll-to-roll printer, the Allegro, after operating in full scale production for several months with two units. Allegro leverages our disruptive technology by utilizing Kornit's superior ink technology into a complete single-step print line, with an ability to print on almost any type of fabric. We also successfully launched the next generation of ink, the Neopigment Pure, with several key customers already transitioning production. These two milestones are a clear testament to how well our products are developed and brought to market."
Non-GAAP gross margin also improved to 47.6% in the second quarter, from 43.8% for the same period last year. Margin expansion primarily resulted from higher volume of ink and systems, and a continued shift to higher priced, high throughput systems. Second quarter Non-GAAP operating income increased to $2.7 million from $0.9 million in the prior-year, and represented a 740 basis point margin improvement to 12.9%. Higher operating margins resulted from an increase in gross margins, and a limited increase in payroll expenses as new hires were weighted to the end of the quarter.
Seligsohn continued, "By almost any measure we executed very well in the second quarter, as demonstrated by higher sales and expanding margins. Operationally we also caught up with our recruiting plans for the first half of the year. Looking forward and given the vast opportunities we face, we expect to continue to invest for future growth during the second half of the year by further increasing headcount and expanding our infrastructure. This investment will position the Company to execute on our aggressive product roadmap, and broaden our field presence to support an expanding customer base in current and new markets."
Results of Operations
In the second quarter of 2015, Kornit reported sales of $21.3 million, an increase of 35.1% compared with prior-year level of $15.7 million. Higher sales were the result of contributions from all of our products, including systems, ink and consumables, and services.
Non-GAAP gross margin as a percentage of sales in the second quarter of 2015 was 47.6%, compared to 43.8% in the prior-year period. Gross margin improvement was driven by a higher mix of higher margin high-throughput systems and an increase in sales of ink and consumables. On a GAAP basis, gross margin was $10 million, or 47.1% of sales.
Non-GAAP operating expenses in the second quarter increased to $7.4 million, compared to $6.0 million in the prior year quarter. As a percent of sales, adjusted operating expenses for the second quarter were 34.7% of sales, a decrease from 38.3% of sales in the prior year and indicative of leverage on higher sales, coupled with new hires weighted toward the end of the second quarter. On a GAAP basis, operating expenses were $8.9 million, or 42% during the quarter.
Non-GAAP research and development as a percentage of sales was 11.9%, or $2.5 million, compared to 15.5%, or $2.4 million in the prior-year. On a GAAP basis, research and development expenses were $2.7 million, or 12.5% of sales during the quarter.
Non-GAAP operating income in the second quarter increased to $2.7 million, compared to $0.9 million in the prior year quarter. As a percent of sales, Non-GAAP operating income for the second quarter was 12.9% of sales, an increase from 5.5% of sales in the prior year, leveraging the higher sales and gross profit.
Non-GAAP net income for the second quarter of 2015 was $2.4 million, or $0.07 per diluted share, compared with Non-GAAP net income of $0.6 million, or $0.06 in the prior year quarter period.
On a GAAP basis, the Company reported net income of $0.7 million, or $0.02 per diluted share, compared to net income of $0.4 million, or $0.04 per diluted share in the second quarter of 2014.
2015 Third Quarter 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
Kornit will host a conference call today at 5:00 p.m. EDT, 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 1-888-428-9490 or +1-719-457-2661. The toll-free Israeli number is 1-809-24 5906. The confirmation code is 1907297.
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 1907297. The telephonic replay will be available beginning at 8:00 p.m. EDT on Tuesday, August 4, 2015, and will last through 11:59 p.m. EDT August 18, 2015. 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: development of the market for digital textile printing, availability of alternative ink, competition, sales concentration, changes to our relationships with suppliers, our success in developing, introducing and selling new or improved products, our success in marketing, our success in effectively increasing our field presence and those factors referred to under "Risk Factors" in the company's final prospectus filed with the U.S. Securities and Exchange Commission. 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, amortization of acquired intangible assets and compensation related to the IPO. 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.
| KORNIT DIGITAL LTD. | ||||
| AND ITS SUBSIDIARIES | ||||
| CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS) | ||||
| (U.S. dollars in thousands, except share and per share data) | ||||
| Six Months Ended | Three Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | (Unaudited) | |||
| Revenues | $ 38,876 | $ 29,001 | $ 21,266 | $ 15,739 |
| Cost of revenues | 20,923 | 17,659 | 11,251 | 8,896 |
| Gross profit | 17,953 | 11,342 | 10,015 | 6,843 |
| Operating expenses: | ||||
| Research and development | 5,506 | 4,588 | 2,655 | 2,448 |
| Selling and marketing | 5,911 | 5,374 | 3,256 | 2,473 |
| General and administrative | 5,185 | 2,323 | 3,030 | 1,279 |
| Total operating expenses | 16,602 | 12,285 | 8,941 | 6,200 |
| Operating income (loss) | 1,351 | (943) | 1,074 | 643 |
| Financial expenses, net | (449) | (94) | (192) | (102) |
| Income (loss) before taxes on income | 902 | (1,037) | 882 | 541 |
| Taxes on income | 385 | 303 | 164 | 168 |
| Net income (loss) | 517 | (1,340) | 718 | 373 |
| Basic net income (loss) per share | $ 0.03 | $ (0.15) | $ 0.02 | $ 0.04 |
| Weighted average number of shares used in computing basic net income (loss) per share | 19,370,095 | 8,969,947 | 29,766,965 | 8,973,224 |
| Diluted net income (loss) per share | $ 0.02 | $ (0.15) | $ 0.02 | $ 0.04 |
| Weighted average number of shares used in computing diluted net income (loss) per share | 21,268,193 | 8,969,947 | 31,778,725 | 10,122,653 |
| KORNIT DIGITAL LTD. | ||
| AND ITS SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (U.S. dollars in thousands) | ||
| June 30, | December 31, | |
| 2015 | 2014 | |
| (Unaudited) | ||
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | $ 80,426 | $ 4,993 |
| Trade receivables, net | 11,071 | 9,770 |
| Other accounts receivables and prepaid expenses | 3,258 | 1,775 |
| Inventory | 13,407 | 11,986 |
| Total current assets | 108,162 | 28,524 |
| LONG-TERM ASSETS: | ||
| Severance pay fund | 1,198 | 1,187 |
| Property and equipment, net | 3,788 | 3,660 |
| Intangible assets, net | 1,136 | 245 |
| Deferred issuance costs | -- | 849 |
| Other assets | 344 | 249 |
| Total long-term assets | 6,466 | 6,190 |
| Total assets | $ 114,628 | $ 34,714 |
| LIABILITIES AND EQUITY | ||
| CURRENT LIABILITIES: | ||
| Trade payables | $ 9,812 | $ 5,901 |
| Employees and payroll accruals | 3,643 | 2,968 |
| Deferred revenues and advances from customers | 1,559 | 1,863 |
| Other payables and accrued expenses | 2,907 | 2,606 |
| Total current liabilities | 17,921 | 13,338 |
| LONG-TERM LIABILITIES: | ||
| Accrued severance pay | 1,956 | 1,903 |
| Deferred taxes | 119 | 122 |
| Total long-term liabilities | 2,075 | 2,025 |
| SHAREHOLDERS' EQUITY | 94,632 | 19,351 |
| Total liabilities and shareholders' equity | $ 114,628 | $ 34,714 |
| KORNIT DIGITAL LTD. | ||||
| AND ITS SUBSIDIARIES | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (U.S. dollars in thousands) | ||||
| Six Months Ended | Three Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | (Unaudited) | |||
| Cash flows from operating activities: | ||||
| Net income (loss) | $ 517 | $ (1,340) | $ 718 | $ 373 |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||
| Depreciation and amortization | 848 | 644 | 450 | 337 |
| Share-based compensation | 975 | 264 | 535 | 188 |
| Decrease in accrued severance pay, net | 42 | 221 | 93 | 207 |
| Increase in trade receivables | (1,491) | (1,598) | (1,111) | (2,616) |
| Decrease (increase) in other receivables and prepaid expenses | (1,252) | (590) | (580) | 118 |
| Increase in inventories | (1,737) | (1,535) | (389) | (652) |
| Changes in deferred taxes, net | (58) | -- | (55) | 9 |
| Increase (decrease) in other long term assets | (100) | (7) | 101 | 1 |
| Increase (decrease) in trade payables | 3,120 | (423) | 1,230 | (598) |
| Increase in employees and payroll accruals | 687 | 276 | 67 | 228 |
| Increase (decrease) in deferred revenues | (275) | 3,170 | 83 | 2,835 |
| Increase (decrease) in other payables and accrued expenses | 338 | (986) | (326) | (651) |
| Gain from sale of property and equipments | -- | (5) | -- | -- |
| Foreign currency translation loss on inter company balances with foreign subsidiaries | 403 | 50 | (176) | 34 |
| Net cash provided by (used in) operating activities | 2,017 | (1,859) | 640 | (187) |
| Cash flows from investing activities: | ||||
| Purchase of property and equipment | (773) | (892) | (433) | (566) |
| Cash paid in connection with acquisition | (1,000) | -- | -- | -- |
| Proceeds from sale of property and equipment | -- | 6 | -- | |
| Increase in short term deposits | -- | 1,018 | -- | 1,018 |
| Net cash provided by (used in) investing activities | (1,773) | 132 | (433) | 452 |
| Cash flows from financing activities: | ||||
| Proceeds from initial public offering, net | 75,232 | -- | 75,600 | -- |
| Exercise of employee stock options | -- | 6 | -- | -- |
| Net cash provided by financing activities | 75,232 | 6 | 75,600 | -- |
| Foreign currency translation adjustments on cash and cash equivalents | (44) | (5) | 25 | (4) |
| Increase (decrease) in cash and cash equivalents | 75,476 | (1,721) | 75,808 | 265 |
| Cash and cash equivalents at the beginning of the period | 4,993 | 5,329 | 4,591 | 3,342 |
| Cash and cash equivalents at the end of the period | 80,426 | 3,603 | 80,424 | 3,603 |
|
Non-cash investing activities: |
||||
| Non-cash investing activities: | ||||
| Purchase of property and equipment on credit | 40 | 38 | 40 | 38 |
| Non-cash issuance expenses | 1,052 | -- | 52 | -- |
| Inventory transferred to be used as property and equipment | 284 | -- | 27 | -- |
| Property and equipment transferred to be used as inventory | 106 | -- | 106 | -- |
| KORNIT DIGITAL LTD. | ||||
| AND ITS SUBSIDIARIES | ||||
| RECONCILIATION OF GAAP TO NON-GAAP CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS) | ||||
| (U.S. dollars in thousands, except per share data) | ||||
| Six Months Ended | Three Months Ended | |||
| June 30, | June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| (Unaudited) | (Unaudited) | |||
| GAAP net income (loss) as reported | $ 517 | $ (1,340) | $ 718 | $ 373 |
| Non-GAAP adjustments | ||||
| Expenses recorded for share-based compensation | ||||
| Cost of revenues | 112 | 39 | 53 | 19 |
| Research and development | 124 | 14 | 68 | 7 |
| Selling and marketing | 164 | 81 | 80 | 44 |
| General and administrative | 575 | 130 | 334 | 118 |
| Acquisition related expenses | ||||
| General and administrative | 550 | -- | -- | -- |
| Research and development | 125 | -- | 62 | -- |
| Intangible assets amortization | ||||
| Cost of revenues | 113 | 62 | 57 | 31 |
| Compensation in relation to the IPO | ||||
| Separation payment to shareholder | 750 | -- | 750 | -- |
| IPO bonuses to employees | 270 | -- | 270 | -- |
| Total adjustments | 2,783 | 326 | 1,674 | 219 |
| Non-GAAP net income (loss) | $ 3,300 | $ (1,014) | $ 2,392 | $ 592 |
| Non- GAAP diluted net income (loss) per share | $ 0.15 | $ (0.11) | $ 0.07 | $ 0.06 |
| Weighted average number of shares used in computing diluted net income (loss) per share | 2,1657,529 | 8,969,947 | 32,145,288 | 10,463,479 |