Kornit Digital Ltd. (NASDAQ:KRNT) Q2 2021 Earnings Conference Call August 10, 2021 8:30 AM ET Company Participants Andrew Backman - Global Head of Investor Relations Ronen Samuel - Chief Executive Officer Alon Rozner - Chief Financial Officer Conference Call Participants Rod Hall - Goldman Sachs Jim Suva - Citigroup Brian Drab - William Blair and Company Jim Ricchiuti - Needham and Company David Mizrahi - Berenberg Danny Eggerichs - Craig Hallum Capital Tavy Rosner - Barclays Patrick Ho - Stifel Financial C ...

1 ©2021 Kornit Digital. All rights reserved. KORNIT DIGITAL (NASDAQ: KRNT) Q2 2021 EARNINGS CALL SUPPORTING SLIDES 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," " ...

Financial Goals and Projections - Kornit's goal is to achieve $1 billion in revenue by 2026[10] - The company is targeting a gross margin of 50%-54% and an operating margin of over 20% by 2026[70, 76] - KornitX revenue goal is to exceed $100 million in 2026[67] - The company's annual run rate goal is $500 million before the end of 2023[70] Market Opportunity and Technology - The Direct-to-Garment (DTG) market represents a Total Addressable Market (TAM) of 21 billion impressions in 2020, projected to reach 31 billion impressions by 2026[47] - The Direct-to-Fabric (DTF) market represents a TAM of 39 billion square meters in 2020, projected to reach 42 billion square meters in 2026[51] - Embroidery represents a $5.2 billion impressions market[29] - Heat Transfer and Vinyl represent a 2.2 billion impressions market[34] - High Density represents a 0.3 billion impressions market[37] Technological Advancements - The company introduced MAX Technology, setting a new standard for on-demand production with higher quality, productivity, durability, and new sustainability applications[25, 26] - Atlas Max with automation reduces loading and unloading time from 35 seconds to 15 seconds, resulting in a 20% increase in garments per hour[43]

©2021 Kornit Digital. All rights reserved. KORNIT DIGITAL (NASDAQ: KRNT) 1 Q1 2021 EARNINGS CALL SUPPORTING SLIDES 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," " ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-36903 KORNIT DIGITAL LTD. (Exact name of Registrant as specifi ...

Kornit Digital Ltd. (NASDAQ:KRNT) Q4 2020 Earnings Conference Call February 16, 2021 5:00 PM ET Company Participants Allise Furlani - Investor Relations, Managing Director at The Blueshirt Group Ronen Samuel - Chief Executive Officer Alon Rozner - Chief Financial Officer Conference Call Participants Jim Suva - Citigroup Investment Research Peter Zdebski - Barclays Brian Drab - William Blair Patrick Ho - Stifel Jim Ricchiuti - Needham & Company Rod Hall - Goldman Sachs Greg Palm - Craig-Hallum Capital Group ...

©2021 Kornit Digital. All rights reserved. KORNIT DIGITAL (NASDAQ: KRNT) 1 Q4 2020 EARNINGS CALL SUPPORTING SLIDES 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," " ...

PART I [ITEM 3. Key Information](index=7&type=section&id=ITEM%203.%20Key%20Information) The company presents selected financial data from 2015-2019 and details significant business and operational risks [Selected Financial Data](index=7&type=section&id=A.%20Selected%20Financial%20Data) The company shows consistent revenue growth from 2015-2019, alongside volatile net income and rising total assets Consolidated Statements of Income Data (2015-2019) | Indicator | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $86,405 | $108,694 | $114,088 | $142,373 | $179,866 | | **Gross Profit** | $40,585 | $49,410 | $54,111 | $69,869 | $82,076 | | **Operating Income (Loss)** | $5,768 | $1,430 | $(2,083) | $5,604 | $7,598 | | **Net Income (Loss)** | $4,725 | $828 | $(2,015) | $12,429 | $10,167 | | **Diluted EPS** | $0.18 | $0.03 | $(0.06) | $0.35 | $0.26 | Consolidated Balance Sheet Data (2015-2019) | Indicator | 2015 | 2016 | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Cash and cash equivalents** | $18,464 | $22,789 | $18,629 | $74,132 | $40,473 | | **Working Capital** | $65,455 | $68,651 | $63,907 | $107,584 | $205,825 | | **Total Assets** | $123,352 | $140,046 | $178,374 | $214,823 | $405,466 | | **Total Shareholders' Equity** | $100,262 | $107,188 | $150,699 | $179,136 | $338,303 | - Total share-based compensation expense increased steadily from **$2.4 million** in 2015 to **$6.6 million** in 2019[33](index=33&type=chunk) [Risk Factors](index=8&type=section&id=D.%20Risk%20Factors) Key risks include market adoption, customer concentration, supplier dependency, and geopolitical instability in Israel - A significant portion of sales is concentrated among a few customers, with **Amazon alone accounting for 12% of 2019 revenues**[43](index=43&type=chunk) - The company's business is seasonal, with the **third or fourth quarter historically being the strongest** and the first quarter the weakest[45](index=45&type=chunk)[46](index=46&type=chunk) - The company relies on **single or limited-source suppliers** for critical components, such as print heads from FujiFilm Dimatix, Inc (FDMX)[52](index=52&type=chunk)[53](index=53&type=chunk) - The company's headquarters and primary manufacturing facilities in Israel create **susceptibility to regional political, economic, and military instability**[112](index=112&type=chunk) - The widespread outbreak of the **coronavirus** is noted as a significant risk that could adversely affect business operations and financial condition[95](index=95&type=chunk) [ITEM 4. Information on the Company](index=30&type=section&id=ITEM%204.%20Information%20on%20the%20Company) The company details its history, business overview, and corporate structure within the transforming textile printing industry [History and Development of the Company](index=30&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Founded in 2002 and public since 2015, recent capital expenditures focus on a new facility and a U.S. acquisition - The company was incorporated in Israel in 2002 and its shares began trading on NASDAQ (**KRNT**) on April 2, 2015[125](index=125&type=chunk)[126](index=126&type=chunk) - Principal capital expenditures include a new manufacturing facility in Israel and the **$4.7 million acquisition** of assets from a former U.S. distributor[128](index=128&type=chunk) [Business Overview](index=31&type=section&id=B.%20Business%20Overview) The company's digital printing solutions target the textile industry's shift to on-demand and sustainable production - The global value of digital printed textile output was estimated at **$3.2 billion** in 2018 and is expected to grow to **$5.5 billion by 2023**[130](index=130&type=chunk) - Kornit's mission is to facilitate the textile industry's transition from **analog to digital production methods**[183](index=183&type=chunk) - The company's solutions are differentiated by their patented **wet-on-wet printing methodology**, which streamlines the production process[185](index=185&type=chunk)[187](index=187&type=chunk) - As of December 31, 2019, Kornit had over 1,000 customers globally, and 2019 revenues were **$179.9 million**, a 26.3% increase[190](index=190&type=chunk) - A key growth strategy is to enter adjacent markets to drive the adoption of digital printing over **analog screen-printing**[205](index=205&type=chunk) [Organizational Structure](index=51&type=section&id=C.%20Organizational%20Structure) The Israeli parent company operates through six wholly-owned subsidiaries in key global regions - The company consists of the Israeli parent, Kornit Digital Ltd, and **six wholly-owned subsidiaries** in Israel, the U.S., Germany, Hong Kong, the U.K., and Japan[248](index=248&type=chunk) [Property, Plant and Equipment](index=51&type=section&id=D.%20Property%2C%20Plant%20and%20Equipment) Key facilities include leased headquarters in Israel and the U.S., with a new manufacturing plant under construction - Corporate headquarters are in Rosh Ha'Ayin, Israel, with a new manufacturing facility under construction in Kiryat Gat, expected to be completed around **August 2020**[249](index=249&type=chunk) - The U.S. headquarters are located in Englewood, New Jersey, under a lease that expires in **February 2028**[250](index=250&type=chunk) [ITEM 5. Operating and Financial Review and Prospects](index=52&type=section&id=ITEM%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Management discusses financial results, highlighting revenue growth, margin pressure, liquidity, and contractual obligations [Operating Results](index=53&type=section&id=A.%20Operating%20Results) Revenues grew 26.3% in 2019, but gross margin declined due to product mix and acquisition-related costs Revenue Breakdown (2018 vs. 2019) | Revenue Source | 2018 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Systems | $65.8M | $91.4M | +38.8% | | Ink & Consumables | $59.9M | $65.2M | +8.9% | | Services | $16.6M | $23.3M | +39.8% | | **Total Revenues** | **$142.4M** | **$179.9M** | **+26.3%** | - **Gross margin decreased to 45.6%** in 2019 from 49.1% in 2018, due to acquisition-related costs, product mix, and inventory write-offs[283](index=283&type=chunk) - **Sales and marketing expenses increased by 31.2%** in 2019, driven by higher headcount, increased sales commissions, and marketing events[286](index=286&type=chunk) - Taxes on income were a $0.7 million expense in 2019 compared to a **$5.4 million tax benefit in 2018**, which was primarily a one-time item[290](index=290&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position, bolstered by a 2019 follow-on offering, despite lower operating cash flow Cash Flow Summary (2017-2019) | (in thousands) | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $5,990 | $33,368 | $11,004 | | **Net cash provided by (used in) investing activities** | $(46,744) | $16,682 | $(179,497) | | **Net cash provided by financing activities** | $36,437 | $5,525 | $135,131 | - The decrease in operating cash flow in 2019 was significantly impacted by an **$18.6 million increase in accounts receivable**[348](index=348&type=chunk)[350](index=350&type=chunk) - The company raised **$129.7 million in net proceeds** from a follow-on offering in June 2019, significantly boosting cash from financing activities[361](index=361&type=chunk) [Contractual Obligations](index=69&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) Total contractual obligations were $56.8 million as of year-end 2019, primarily from leases and purchase commitments Contractual Obligations as of December 31, 2019 (in thousands) | Obligation Type | Total | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 and thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Operating lease obligations** | $26,316 | $4,341 | $3,750 | $2,938 | $2,284 | $2,281 | $10,722 | | **Uncertain tax positions** | $3,039 | - | - | - | - | - | - | | **Purchase commitments** | $26,367 | - | - | - | - | - | - | | **Severance payment** | $1,035 | - | - | - | - | - | - | | **Total** | **$56,757** | **$4,341** | **$3,750** | **$2,938** | **$2,284** | **$2,281** | **$10,722** | [ITEM 6. Directors, Senior Management and Employees](index=69&type=section&id=ITEM%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation, board structure, and growing employee base [Compensation](index=74&type=section&id=B.%20Compensation) Aggregate 2019 compensation for directors and executives was $4.8 million, combining salary, bonuses, and equity - Aggregate compensation paid to directors and executive officers for the year ended December 31, 2019, was **$4.8 million**[386](index=386&type=chunk) 2019 Compensation for Top 5 Covered Executives (in thousands) | Name and Principal Position | Base Salary & Perquisites | Variable Compensation | Equity-Based Compensation | Total | | :--- | :--- | :--- | :--- | :--- | | **Ronen Samuel, CEO** | $637 | $325 | $338 | $1,300 | | **Guy Avidan, CFO** | $470 | $100 | $330 | $900 | | **Gilad Yron, EVP Global Business** | $454 | - | $334 | $788 | | **Haggai Abbo, VP Product Development** | $374 | $52 | $234 | $660 | | **Amir Shaked, VP Corporate Development** | $392 | $68 | $179 | $639 | - The company maintains several equity incentive plans, with the **2015 Incentive Compensation Plan** currently active for granting share options and RSUs[407](index=407&type=chunk) [Board Practices](index=80&type=section&id=C.%20Board%20Practices) The nine-member board has a staggered structure and utilizes foreign private issuer exemptions from certain NASDAQ rules - The board of directors consists of **nine members** divided into three staggered classes with three-year terms[423](index=423&type=chunk) - In August 2019, the company opted out of the Israeli requirement for external directors, instead adhering to **NASDAQ's majority independent director rule**[424](index=424&type=chunk) - The Audit Committee and Compensation Committee are composed entirely of **independent directors**, consistent with NASDAQ and SEC rules[435](index=435&type=chunk)[439](index=439&type=chunk)[442](index=442&type=chunk) [Employees](index=90&type=section&id=D.%20Employees) The company's global workforce grew to 547 employees by year-end 2019, primarily based in Israel and the U.S Employees by Area of Activity (2017-2019) | Area of Activity | 2017 | 2018 | 2019 | | :--- | :--- | :--- | :--- | | Service | 66 | 79 | 101 | | Sales and marketing | 87 | 98 | 131 | | Manufacturing and operations | 73 | 83 | 103 | | Research and development | 122 | 115 | 128 | | General and administrative | 64 | 69 | 84 | | **Total** | **412** | **444** | **547** | - As of December 31, 2019, the company had **339 employees in Israel**, 96 in the United States, 68 in Europe, and 44 in Asia Pacific[470](index=470&type=chunk) [ITEM 7. Major Shareholders and Related Party Transactions](index=91&type=section&id=ITEM%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) Major institutional shareholders are identified, following the complete exit of the former controlling shareholder [Major Shareholders](index=91&type=section&id=A.%20Major%20Shareholders) As of early 2020, major shareholders included Wasatch Advisors, American Capital Management, and Clal Insurance 5% or Greater Shareholders (as of early 2020) | Shareholder | Percentage Ownership | | :--- | :--- | | Wasatch Advisors Inc. | 8.7% | | American Capital Management Inc. | 6.2% | | Clal Insurance Enterprises Holdings Ltd. | 5.6% | - **Fortissimo Capital**, the company's former controlling shareholder, completed the sale of all its remaining ordinary shares in December 2018[477](index=477&type=chunk) [ITEM 8. Financial Information](index=95&type=section&id=ITEM%208.%20Financial%20Information) The company reports no material legal proceedings and has a policy of retaining earnings rather than paying dividends - The company has **never declared or paid cash dividends** and does not anticipate paying any in the foreseeable future[492](index=492&type=chunk) - The company is not currently a party to any **material legal proceedings** that would have a significant effect on its financial position[491](index=491&type=chunk) [ITEM 10. Additional Information](index=96&type=section&id=ITEM%2010.%20Additional%20Information) This section details the material contract with Amazon, including warrants, and outlines key tax considerations for shareholders [Material Contracts](index=96&type=section&id=C.%20Material%20Contracts) A Master Purchase Agreement with Amazon includes volume-based pricing and warrants tied to purchase milestones - The company has a **Master Purchase Agreement with Amazon** for the supply of digital printers, ink, and consumables[504](index=504&type=chunk) - Kornit issued a warrant to an Amazon affiliate to acquire up to **2,932,176 ordinary shares**, vesting based on payments up to $150 million[506](index=506&type=chunk)[507](index=507&type=chunk) - As of December 31, 2019, warrants to purchase **1,612,683 ordinary shares** have vested and are exercisable by Amazon[507](index=507&type=chunk) [Taxation](index=99&type=section&id=E.%20Taxation) Tax implications for non-Israeli and U.S. shareholders are outlined, including capital gains, dividends, and PFIC risk - Non-Israeli resident shareholders are generally **exempt from Israeli capital gains tax** on the sale of shares, subject to certain conditions[519](index=519&type=chunk) - Dividends paid to non-Israeli residents are generally subject to a **25% withholding tax**, which may be reduced under an applicable tax treaty[523](index=523&type=chunk) - The company believes it was not a **Passive Foreign Investment Company (PFIC)** for the 2019 taxable year but notes that status is determined annually[107](index=107&type=chunk)[544](index=544&type=chunk) [ITEM 11. Quantitative and Qualitative Disclosures About Market Risks](index=108&type=section&id=ITEM%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company's primary market risks are foreign currency exposure from NIS-denominated costs and interest rate risk - The company faces significant foreign currency risk as approximately **84% of 2019 revenues were in USD**, while a majority of operating costs were in NIS[563](index=563&type=chunk) - A sensitivity analysis indicates that a **10% change in the value of the NIS against the USD** in 2019 would have impacted net income by approximately $18 million[564](index=564&type=chunk) - The company has a **foreign currency cash flow hedging program** using derivative instruments to manage a portion of its exposure[566](index=566&type=chunk) PART II [ITEM 15. Controls and Procedures](index=110&type=section&id=ITEM%2015.%20Controls%20and%20Procedures) Management concluded that both disclosure controls and internal control over financial reporting were effective at year-end - As of December 31, 2019, management concluded that the company's **disclosure controls and procedures were effective**[575](index=575&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2019[577](index=577&type=chunk)[105](index=105&type=chunk) [ITEM 16. Corporate Governance and Other Matters](index=112&type=section&id=ITEM%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section covers the audit committee financial expert, code of ethics, accountant fees, and governance exemptions - The Board of Directors has determined that Lauri Hanover qualifies as an **"audit committee financial expert"**[581](index=581&type=chunk) Principal Accountant Fees (in thousands) | Fee Type | 2018 | 2019 | | :--- | :--- | :--- | | Audit fees | $319 | $499 | | Audit-Related Fees | - | $85 | | Tax Fees | $81 | $120 | | All Other Fees | $53 | $72 | | **Total** | **$453** | **$776** | - As a foreign private issuer, the company follows Israeli law for **shareholder meeting quorum and director nominations**, which differs from NASDAQ requirements[592](index=592&type=chunk) PART III [ITEM 18. Financial Statements](index=114&type=section&id=ITEM%2018.%20Financial%20Statements) This section contains the complete audited consolidated financial statements and the independent auditor's report - The independent auditor's report on the financial statements provides an **unqualified opinion**[603](index=603&type=chunk) - The independent auditor's report on internal control over financial reporting also provides an **unqualified opinion**[613](index=613&type=chunk) - A critical audit matter identified by the auditor was the **valuation of inventory**, specifically management's estimates for excess and obsolete inventory[608](index=608&type=chunk)[609](index=609&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ...