Kornit Digital Reports 2017 Third Quarter Results

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Highlights
GAAP third quarter 2017 revenues of $28.5 million reflects pre-announced delay of a large customer order.Non-GAAP third quarter 2017 revenues of $28.6 million, compared to the prior year period of $30.9 million.Third quarter 2017 GAAP operating loss of $0.2 million, compared to operating profit of $0.7 million in the prior year.Third quarter non-GAAP operating profit of $1.7 million, compared to $3.9 million in the prior year.Third quarter GAAP net loss of $(0.1) million, or $(0.00) per diluted share; non-GAAP net income of $1.7 million, or $0.05 per diluted share.ROSH-HA`AYIN, Israel, Nov. 07, 2017 — Kornit Digital Ltd. (NASDAQ:KRNT), a leading provider of digital printing solutions for the global printed textile industry, today reported results for the third quarter ended September 30, 2017.Third quarter GAAP revenues which are net of the fair value of the warrants associated with revenues recognized from Amazon in the period were $28.5 million, compared to the prior year period of $30.9 million. On a non-GAAP basis, Kornit reported sales of $28.6 million, down from the prior year level of $30.9 million. Lower revenues were driven by a previously disclosed large customer who was unable to take scheduled delivery of a large number of systems due to unforeseen protracted delays in the receipt of regulatory permits. Excluding this customer issue, the Company continued to realize growth in sales of systems, ink and consumables and services.Gabi Seligsohn, Kornit Digital’s Chief Executive Officer commented, “As mentioned during our pre-announcement call at the end of September, our financial results during the quarter were strongly impacted by a customer delay. While our near term business is impacted by this postponed customer order and slower than expected ramp up in Vulcan revenues, we see the concept of proximity decoration gaining momentum, and driving demand in the apparel industry for direct-to-garment systems which should lead to significant growth in 2018.”During the third quarter, Kornit attended several events, including SGIA in New Orleans where the Company showcased its latest technology and introduced neon ink printing on its Allegro roll-to-roll printer, which enables new and creative applications for customers and was well received by event participants. Seligsohn added, “During this important event we noted a strong uptick in interest from screen printers, which is a direct response to their customers demanding smaller batch manufacturing requiring digital capabilities. This is encouraging to the long-term adoption rate of our highest throughput systems, such as the Vulcan and Avalanche.”Third Quarter Results of Operations
Third quarter GAAP sales which are net of the fair value of the warrants associated with revenues recognized from Amazon during the period was $28.5 million, down from the prior year level of $30.9 million. On a non-GAAP basis, Kornit reported sales of $28.6 million, down from the prior year level of $30.9 million.
GAAP third quarter gross profit increased by 7.2% to $14.6 million, or 51.3% of sales, compared with $13.6 million, or 44.1% of sales, in the prior year. GAAP gross margin was 51.3%, compared with 44.1% in the third quarter of 2016. Higher gross margin was driven by mix shift weighted towards ink and consumables, as a result of customer shipment delays during the period. Non-GAAP gross profit in the third quarter was $15 million, or 52.3% of sales, compared with $15.2 million, or 49.2% of sales in the prior year.GAAP total operating expenses in the third quarter were $14.8 million, or 52% of sales, compared to $13.0 million, or 41.9% of sales, in the prior year period. The increase in operating expenses as a percentage of sales was consistent with the Kornit's previously communicated plans to continue to invest in its global infrastructure buildout. Non-GAAP operating expenses in the third quarter increased to $13.2 million, or 46.2% of sales, compared to $11.4 million, or 36.7% of sales in the prior year.Third quarter GAAP research and development expenses were $5.9 million, or 20.5% of sales, compared to the prior year period of $4.4 million, or 14.2% of sales. Third quarter non-GAAP research and development expenses were $5.6 million, or 19.5% of sales, compared to $4.4 million, or 14.2% of sales in the prior year.  Third quarter GAAP selling and marketing expenses were $5.3 million, or 18.6% of sales compared to the prior year period of $4.8 million, or 15.6% of sales. Third quarter non-GAAP selling and marketing expenses were $4.8 million, or 16.7% of sales, compared to $4.6 million, or 14.8% of sales in the prior year. Third quarter GAAP general and administrative expenses were $3.4 million, or 12% of sales, compared to the prior year period of $3.8 million, or 12.1% of sales. Third quarter non-GAAP general and administrative expenses were $2.9 million, or 10.1% of sales, compared to $2.4 million, or 7.8% of sales in the prior year.On a GAAP basis, third quarter operating loss was $0.2 million, or (0.7%) of sales, compared to the prior year period profit of $0.7 million, or 2.1% of sales. Non-GAAP operating profit in the third quarter decreased to $1.7 million, compared to $3.9 million in the prior year. As a percent of sales, non-GAAP operating margin for the third quarter was 6.1% of sales, compared with 12.5% of sales in the prior year.  On a GAAP basis, the Company reported a net loss of $(0.1) million, or $(0.00) per diluted share, compared to net income of $0.4 million, or $0.01 per diluted share in the third quarter of 2016.  Non-GAAP net income for the third quarter of 2017 was $1.7 million, or $0.05 per diluted share, compared to $3.5 million, or $0.11 per diluted share, in the prior year period.  Balance Sheet and Cash Flow
At September 30, 2017, the Company had cash and marketable securities of $86.5 million, and no long-term debt. Cash flow used in operations for the third quarter of 2017 was $5.9 million, attributable mostly to the increase in inventory.
Fourth Quarter 2017 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 today at 5:00 p.m. ET, or 0:00 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 1-800-289-0498 or +1-719-457-2647. The toll-free Israeli number is 1 80 925 8243. The confirmation code is 8033685.
To listen to a telephonic replay of the conference call, dial toll-free 1-844-512-2921 or +1-412-317-6671 (international) and enter confirmation code 8033685. The telephonic replay will be available beginning at 8:00 p.m. ET on Tuesday, November 7, 2017, and will last through 11:59 p.m. ET on Tuesday, November 21, 2017.  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, our ability to fill orders for our systems, our ability to continue to increase sales of our systems and ink and consumables, 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 30, 2017. 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 impact of the fair value of warrants deducted from revenues, acquisition related expenses, share-based compensation expenses, 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.  The Company has not reconciled its non-GAAP guidance to the nearest equivalent GAAP measure. Such reconciliation is not available without unreasonable effort because the fair value of the warrants which is a key element of the Company’s non-GAAP financial measures is impacted by the Company’s share price, which is information the Company cannot predict.
About Kornit                                                                                              
Kornit Digital (NASDAQ:KRNT) develops, manufactures and markets industrial digital printing technologies for the garment, apparel and textile industries. Kornit delivers complete solutions, including digital printing systems, inks, consumables, software and after-sales support. Leading the digital direct-to-garment printing market with its exclusive eco-friendly NeoPigment printing process, Kornit caters directly to the changing needs of the textile printing value chain. Kornit’s technology enables innovative business models based on web-to-print, on-demand and mass customization concepts. With its immense experience in the direct-to-garment market, Kornit also offers a revolutionary approach to the roll-to-roll textile printing industry: digitally printing with a single ink set onto multiple types of fabric with no additional finishing processes. Founded in 2003, Kornit Digital is a global company, headquartered in Israel with offices in the USA, Europe and Asia Pacific, and serves customers in more than 100 countries worldwide.
 
   
Investor Contact:

Michael Callahan, ICR
(203) 682-8311
[email protected]

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Maria Burns

Maria Burns

Maria is a Viral News Editor who graduated from the University Of California. She likes social media trends, being semi-healthy, Buffalo Wild Wings and vodka with lime. When she isn’t writing, Maria loves to travel. She last went to Thailand to play with elephants and is planning a trip to Bali.
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