• Historical Guidance Practice: Q1 2023 Guidance Non-GAAP Diluted Non-GAAP Net Margin Earnings (Loss) Per THANK YOU 17 ©2023 Kornit Digital. All rights reserved. • Guidance is net of warrants impact for both Revenues and Profitability December 31, Revenue | --- | --- | --- | --- | --- | |-------|------------------------|-------------------------|------------------------|------------------------| | | Net of Warrants Impact | 2022 \nWarrants Impact | Net of Warrants Impact | 2021 \nWarrants Impact | | | $271. ...

[Kornit Digital Reports Fourth Quarter and Full-Year 2022 Results](index=1&type=section&id=Kornit%20Digital%20Reports%20Fourth%20Quarter%20and%20Full-Year%202022%20Results) This section details Kornit Digital's Q4 and full-year 2022 financial performance, including key highlights and warrant impacts [Key Highlights and Management Commentary](index=1&type=section&id=Key%20Highlights%20and%20Management%20Commentary) Kornit Digital reported Q4 2022 consumables and services growth, outlining 2023 strategic priorities for profitability and Apollo launch - Consumables and services revenues grew in Q4 due to a solid peak season[3](index=3&type=chunk)[4](index=4&type=chunk) - Management recognized 2022 as a challenging year, implementing decisive actions to adapt operations to market conditions[3](index=3&type=chunk) - Key strategic priorities for 2023 include returning to profitability, successful Apollo system launch, and scaling the business[3](index=3&type=chunk)[4](index=4&type=chunk) [Warrants Impact Analysis](index=2&type=section&id=Warrants%20Impact%20Analysis) The company detailed the significant adverse, non-cash impact of outstanding warrants on its financial results for both the fourth quarter and the full year of 2022 Fourth Quarter Warrants Impact Comparison (2022 vs 2021) | Metric | Q4 2022 Warrants Impact ($) | Q4 2021 Warrants Impact ($) | | :--- | :--- | :--- | | Revenue | $4.3M | $7.9M | | Non-GAAP Gross Margin (%) | 4.1% | 4.1% | | Non-GAAP Operating Margin (%) | 7.4% | 7.8% | | Non-GAAP Net Margin (%) | 7.1% | 7.6% | | Non-GAAP Diluted EPS ($) | $0.09 | $0.16 | Full-Year Warrants Impact Comparison (2022 vs 2021) | Metric | FY 2022 Warrants Impact ($) | FY 2021 Warrants Impact ($) | | :--- | :--- | :--- | | Revenue | $22.5M | $25.4M | | Non-GAAP Gross Margin (%) | 4.7% | 3.8% | | Non-GAAP Operating Margin (%) | 8.8% | 6.6% | | Non-GAAP Net Margin (%) | 8.6% | 6.5% | | Non-GAAP Diluted EPS ($) | $0.45 | $0.52 | [Fourth Quarter 2022 Results of Operations](index=3&type=section&id=Fourth%20Quarter%202022%20Results%20of%20Operations) Q4 2022 total revenue decreased to $63.3 million, resulting in a GAAP net loss of $35.4 million Q4 2022 vs Q4 2021 Performance | Metric | Q4 2022 ($) | Q4 2021 ($) | | :--- | :--- | :--- | | Total Revenue | $63.3M | $87.5M | | GAAP Net Income (Loss) | ($35.4M) | $1.0M | | GAAP EPS (basic) | ($0.71) | $0.02 | | Non-GAAP Net Income (Loss) | ($6.6M) | $6.4M | | Non-GAAP EPS (basic) | ($0.13) | $0.13 | [Full-Year 2022 Results of Operations](index=3&type=section&id=Full-Year%202022%20Results%20of%20Operations) Full-year 2022 total revenue decreased to $271.5 million, resulting in a GAAP net loss of $79.1 million Full-Year 2022 vs 2021 Performance | Metric | Full-Year 2022 ($) | Full-Year 2021 ($) | | :--- | :--- | :--- | | Total Revenue | $271.5M | $322.0M | | GAAP Net Income (Loss) | ($79.1M) | $15.5M | | GAAP EPS (basic) | ($1.58) | $0.32 | | Non-GAAP Net Income (Loss) | ($32.6M) | $36.1M | | Non-GAAP EPS (basic) | ($0.65) | $0.74 | [Financial Outlook](index=3&type=section&id=First%20Quarter%202023%20Guidance) This section outlines the company's Q1 2023 financial guidance, including revenue and adjusted EBITDA margin forecasts [First Quarter 2023 Guidance](index=3&type=section&id=First%20Quarter%202023%20Guidance) Q1 2023 revenues are anticipated between $47 million and $52 million, with adjusted EBITDA margin of -27% to -35% of revenue, including warrant impact Q1 2023 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues ($) | $47M - $52M | | Adjusted EBITDA Margin (%) | -27% to -35% of revenue | - Guidance now incorporates the non-cash expense impact from warrants for better alignment with reported metrics[12](index=12&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents Kornit Digital's consolidated balance sheets, statements of operations, and cash flow statements [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of December 31, 2022, total assets decreased to $957.7 million from $1,040.9 million, primarily due to reduced cash and cash equivalents Key Balance Sheet Items (in thousands) | Account | Dec 31, 2022 ($) | Dec 31, 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $104,597 | $611,551 | | Inventory | $89,415 | $63,017 | | Total current assets | $578,839 | $775,343 | | Total assets | $957,666 | $1,040,875 | | Total liabilities | $88,844 | $121,322 | | Total shareholders' equity | $868,822 | $919,553 | [Consolidated Statements of Operations](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For 2022, total revenues were $271.5 million, resulting in an operating loss of $69.9 million and a net loss of $79.1 million Year-End Statement of Operations (in thousands) | Account | Year Ended Dec 31, 2022 ($) | Year Ended Dec 31, 2021 ($) | | :--- | :--- | :--- | | Total revenues | $271,518 | $322,006 | | Gross profit | $96,500 | $151,911 | | Total operating expenses | $166,382 | $139,118 | | Operating income (loss) | ($69,882) | $12,793 | | Net income (loss) | ($79,065) | $15,527 | | Diluted net income (loss) per share | ($1.58) | $0.32 | [Consolidated Statements of Cash Flows](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For 2022, net cash used in operating activities was $99.3 million, leading to a $507.0 million decrease in cash and cash equivalents, ending at $104.6 million Year-End Cash Flow Summary (in thousands) | Cash Flow Activity | Year Ended Dec 31, 2022 ($) | Year Ended Dec 31, 2021 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($99,347) | $53,644 | | Net cash provided by (used in) investing activities | ($407,275) | $89,755 | | Net cash provided by (used in) financing activities | ($332) | $342,375 | | Increase (decrease) in cash and cash equivalents | ($506,954) | $485,774 | | Cash and cash equivalents at end of period | $104,597 | $611,551 | [Non-GAAP Financial Measures and Reconciliations](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides reconciliations of GAAP financial measures to non-GAAP counterparts, including net income and Adjusted EBITDA [Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations](index=8&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The company provides a reconciliation from GAAP to non-GAAP results, showing a non-GAAP net loss of $32.6 million for 2022 after various adjustments Full-Year GAAP to Non-GAAP Net Income Reconciliation (in thousands) | Description | FY 2022 ($) | FY 2021 ($) | | :--- | :--- | :--- | | **GAAP net income (loss)** | **($79,065)** | **$15,527** | | Share-based compensation | $22,649 | $15,133 | | Intangible assets amortization | $2,543 | $1,410 | | Restructuring expenses | $1,693 | - | | Non-cash deferred tax expenses (income) | $10,014 | $2,733 | | Non-recurring tax payment | $11,485 | - | | Other adjustments | ($1,948) | $1,296 | | **Non-GAAP net income (Loss)** | **($32,629)** | **$36,099** | [Reconciliation of GAAP Net Income to Adjusted EBITDA](index=12&type=section&id=RECONCILIATION%20OF%20GAAP%20NET%20INCOME%20TO%20ADJUSTED%20EBITDA) This reconciliation shows Adjusted EBITDA for 2022 was negative $30.8 million, or negative $8.3 million when excluding the $22.5 million impact from warrants Full-Year Adjusted EBITDA Reconciliation (in thousands) | Description | FY 2022 ($) | FY 2021 ($) | | :--- | :--- | :--- | | **GAAP Net Income (Loss)** | **($79,065)** | **$15,527** | | Adjustments (Taxes, Interest, SBC, etc.) | $37,243 | $14,769 | | **Non-GAAP Operating Income (Loss)** | **($41,822)** | **$30,296** | | Depreciation | $11,022 | $5,686 | | **Adjusted EBITDA** | **($30,800)** | **$35,982** | | Warrants Impact | $22,500 | $25,423 | | **Adjusted EBITDA, ex. Warrants Impact** | **($8,300)** | **$61,405** |

Third Quarter 2022 Results - Total revenues were $66.8 million, after accounting for a $5.6 million non-cash impact from warrants[10] - Consumables revenues showed strong growth compared to both the second quarter and the previous year[10] - Services revenues also increased from Q2 2022 and year-over-year, driven by a major fleet upgrade to Atlas MAX for a large strategic customer[10] Operating Environment & Future Outlook - Macroeconomic headwinds, including inflation and rising interest rates, are impacting customers and prospects, leading to longer sales cycles and increased demand for financing options[11] - The company expects systems revenues to remain challenging in the coming quarters, but this will be balanced by healthy growth in consumables and service revenues[13] - Systems revenues in 2023 are anticipated to build up more linearly, starting in the second quarter and heading into the peak season[13] Financial Highlights - Non-GAAP operating expenses decreased by approximately 10% from $40.7 million in Q2 2022 to $36.7 million in Q3 2022[21] - Q3 2022 cash used in operating activities was approximately $5.1 million[24] - The company's cash balance, including bank deposits and marketable securities, was approximately $689.8 million at the end of Q3 2022[24] Q4 2022 Guidance - The company expects Q4 2022 revenues to be in the range of $66 million to $70 million[27] - Non-GAAP operating margins for Q4 2022 are expected to be in the range of -6% to -10% of revenue[27]

Kornit Digital Ltd. (NASDAQ:KRNT) Q3 2022 Earnings Conference Call November 9, 2022 8:30 AM ET Company Participants Andrew Backman - Global Head of Investor Relations Ronen Samuel - Chief Executive Officer Lauri Hanover - Incoming Chief Financial Officer Amir Shaked-Mandel - Executive Vice President of Corporate Development Conference Call Participants Jim Suva - Citi Jared Maymon - Berenberg Tavy Rosner - Barclays Brian Drab - William Blair Chris Grenga - Needham Chris Moore - CJS Securities Greg Palm - Cr ...

KORNIT DIGITAL LTD. AND SUBSIDIARIES INTERIM CONSOLIDATED FINANCIAL STATEMENTS [Interim Consolidated Balance Sheets](index=2&type=section&id=Interim%20Consolidated%20Balance%20Sheets) Kornit Digital's balance sheet as of June 30, 2022, reflects a slight decrease in total assets and equity, primarily due to cash reduction Consolidated Balance Sheet Highlights (in thousands USD) | Balance Sheet Item | June 30, 2022 (Unaudited) | December 31, 2021 (Audited) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $196,611 | $611,551 | -67.9% | | Inventories | $89,580 | $63,017 | +42.1% | | Total current assets | $641,918 | $775,343 | -17.2% | | Total assets | $1,007,380 | $1,040,875 | -3.2% | | Total current liabilities | $75,282 | $96,676 | -22.1% | | Total liabilities | $100,964 | $121,322 | -16.8% | | Retained earnings | $18,809 | $43,482 | -56.7% | | Total shareholders' equity | $906,416 | $919,553 | -1.4% | [Interim Consolidated Statements of Operations](index=4&type=section&id=Interim%20Consolidated%20Statements%20of%20Operations) The company shifted from net income to a significant net loss for the first half of 2022, driven by a substantial increase in operating expenses despite a slight revenue decrease Statement of Operations Summary (in thousands USD, except per share data) | Metric | Six months ended June 30, 2022 | Six months ended June 30, 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $141,429 | $147,789 | -4.3% | | Gross profit | $53,934 | $68,992 | -21.8% | | Total operating expenses | $85,738 | $59,811 | +43.3% | | Operating income (loss) | ($31,804) | $9,181 | N/A | | Net income (loss) | ($24,673) | $10,701 | N/A | | Diluted earnings (losses) per share | ($0.50) | $0.22 | N/A | [Interim Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Interim%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported a significant total comprehensive loss for the first half of 2022, primarily due to net loss and unrealized losses on marketable securities and hedges Comprehensive Income (Loss) Summary (in thousands USD) | Component | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Net income (loss) | ($24,673) | $10,701 | | Other comprehensive loss, net of tax | ($12,104) | ($712) | | **Comprehensive income (loss)** | **($36,777)** | **$9,989** | [Interim Statements of Changes in Shareholders' Equity](index=6&type=section&id=Interim%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity declined in the first half of 2022, primarily due to net and comprehensive losses, partially offset by share-based compensation and customer warrants Changes in Shareholders' Equity (in thousands USD) | Description | Six months ended June 30, 2022 | | :--- | :--- | | Balance as of January 1, 2022 | $919,553 | | Net loss | ($24,673) | | Other comprehensive loss | ($12,104) | | Share-based compensation | $10,779 | | Warrants to customers | $12,521 | | **Balance as of June 30, 2022** | **$906,416** | [Interim Consolidated Statements of Cash Flows](index=7&type=section&id=Interim%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a significant net decrease in cash and equivalents in the first half of 2022, driven by substantial outflows from operating and investing activities Cash Flow Summary (in thousands USD) | Cash Flow Activity | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($54,640) | $10,330 | | Net cash used in investing activities | ($359,958) | ($44,147) | | Net cash provided by (used in) financing activities | ($342) | $608 | | **Decrease in cash and cash equivalents** | **($414,940)** | **($33,209)** | | Cash and cash equivalents at end of period | $196,611 | $92,568 | [Notes to Interim Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Interim%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on significant events, including a recent acquisition, changes in inventory, revenue impacts from warrants, and various financial commitments [NOTE 1: GENERAL](index=9&type=section&id=NOTE%201%3A-%20GENERAL) Kornit Digital specializes in digital printing solutions for the textile industry and faces operational risks due to its dependence on key suppliers - The company's core business is providing digital printing solutions for the textile industry, including systems, ink, software, and services[20](index=20&type=chunk) - A key operational risk is the company's dependence on four major suppliers for critical components[20](index=20&type=chunk) [NOTE 2: SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%202%3A-%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The interim financial statements adhere to U.S. GAAP and involve significant management estimates for various valuations, including intangible assets, goodwill, and stock-based awards - The financial statements are prepared under U.S. GAAP for interim reporting and include all normal recurring adjustments[17](index=17&type=chunk) - Management uses significant estimates for valuations, including goodwill, inventory write-offs, and stock-based awards[19](index=19&type=chunk)[22](index=22&type=chunk) [NOTE 3: BUSINESS COMBINATIONS](index=10&type=section&id=NOTE%203%3A-%20BUSINESS%20COMBINATIONS) Kornit acquired Tesoma GMBH for **$15.4 million** in April 2022 to enhance its textile dryer offerings, resulting in **$3.7 million** of goodwill - Acquired Tesoma GMBH on April 5, 2022, for **$15.4 million** to enhance its dryer technology offerings for the textile industry[23](index=23&type=chunk)[24](index=24&type=chunk) Tesoma Acquisition Purchase Price Allocation (in thousands USD) | Asset/Liability | Fair Value | | :--- | :--- | | Net tangible assets | $9,225 | | Intangible assets (Technology, Customer Relationship, Backlog) | $2,401 | | Goodwill | $3,717 | | **Total purchase price** | **$15,443** | [NOTE 4: MARKETABLE SECURITIES](index=12&type=section&id=NOTE%204%3A-%20MARKETABLE%20SECURITIES) Marketable securities significantly increased to **$247.9 million** by June 30, 2022, but incurred a substantial increase in gross unrealized losses Marketable Securities Summary (in thousands USD) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Amortized cost | $261,458 | $177,949 | | Gross unrealized gain | $16 | $625 | | Gross unrealized loss | ($13,575) | ($1,189) | | **Fair value** | **$247,899** | **$177,385** | [NOTE 5: FAIR VALUE MEASUREMENTS](index=14&type=section&id=NOTE%205%3A-%20FAIR%20VALUE%20MEASUREMENTS) Marketable securities and foreign currency derivatives are classified as Level 2 fair value measurements, valued using market-observable data - Marketable securities and derivative contracts are classified as **Level 2** fair value measurements[32](index=32&type=chunk) [NOTE 6: INVENTORIES](index=14&type=section&id=NOTE%206%3A-%20INVENTORIES) Inventories significantly increased by **42.1%** to **$89.6 million** by June 30, 2022, primarily in raw materials and finished products, with **$2.5 million** in write-offs Inventory Breakdown (in thousands USD) | Category | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Raw materials and components | $42,046 | $29,857 | | Work in progress | $1,490 | $0 | | Finished products | $46,044 | $33,160 | | **Total** | **$89,580** | **$63,017** | [NOTE 7: DERIVATIVES AND HEDGING ACTIVITIES](index=15&type=section&id=NOTE%207%3A-%20DERIVATIVES%20AND%20HEDGING%20ACTIVITIES) The company uses foreign currency derivatives as cash flow hedges for New Israeli Shekel expenses, with a notional amount of **$39.8 million** as of June 30, 2022 - The company uses derivative contracts to hedge foreign currency risk related to expenses in New Israeli Shekels[37](index=37&type=chunk) - The notional amount for cash flow hedges increased to **$39.8 million** at June 30, 2022, from **$21.8 million** at December 31, 2021[39](index=39&type=chunk) [NOTE 8: COMMITMENTS AND CONTINGENT LIABILITIES](index=16&type=section&id=NOTE%208%3A-%20COMMITMENTS%20AND%20CONTINGENT%20LIABILITIES) The company has significant purchase commitments of approximately **$113 million** and ongoing royalty obligations on ink revenues, alongside an unused line of credit - The company has purchase commitments of approximately **$113 million**, mostly due within one year[43](index=43&type=chunk) - Royalty expenses on ink revenues were **$312 thousand** for the first six months of 2022, consistent with the prior year[44](index=44&type=chunk) [NOTE 9: EARNINGS (LOSSES) PER SHARE](index=17&type=section&id=NOTE%209%3A-%20EARNINGS%20%28LOSSES%29%20PER%20SHARE) The company reported a basic and diluted loss per share of **$0.50** for the first half of 2022, a significant reversal from prior-year earnings, rendering outstanding equity awards anti-dilutive Earnings (Losses) Per Share Calculation | Metric | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Net income (loss) (in thousands USD) | ($24,673) | $10,701 | | Denominator for basic EPS (shares) | 49,707,782 | 46,119,416 | | Denominator for diluted EPS (shares) | 49,707,782 | 47,709,429 | | **Basic earnings (losses) per share** | **($0.50)** | **$0.23** | | **Diluted earnings (losses) per share** | **($0.50)** | **$0.22** | [NOTE 10: SHAREHOLDERS' EQUITY](index=17&type=section&id=NOTE%2010%3A-%20SHAREHOLDERS%27%20EQUITY) Share-based compensation totaled **$10.8 million** in the first half of 2022, with warrants issued to Amazon significantly reducing revenues by **$12.5 million** - The company has significant warrant agreements with Amazon Inc. tied to purchase volumes, which impact revenue recognition[56](index=56&type=chunk)[57](index=57&type=chunk) - The accounting for Amazon's warrants reduced revenues by **$12.5 million** and **$9.7 million** in the first six months of 2022 and 2021, respectively[58](index=58&type=chunk) Share-Based Compensation Expense (in thousands USD) | Department | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Cost of products & services | $1,902 | $1,118 | | Research and development | $2,457 | $1,071 | | Sales and marketing | $3,300 | $2,333 | | General and administrative | $3,120 | $2,377 | | **Total** | **$10,779** | **$6,899** | [NOTE 11: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=21&type=section&id=NOTE%2011%3A-%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20%28LOSS%29) Accumulated other comprehensive income shifted to a **$11.5 million** loss by June 30, 2022, primarily due to unrealized losses on marketable securities and cash flow hedges Changes in Accumulated Other Comprehensive Income (Loss) (in thousands USD) | Component | Beginning Balance (Jan 1, 2022) | Net Change in H1 2022 | Ending Balance (June 30, 2022) | | :--- | :--- | :--- | :--- | | Unrealized gain (loss) on marketable securities | ($522) | ($9,918) | ($10,440) | | Unrealized gain (loss) on cash flow hedges | $293 | ($2,186) | ($1,893) | | Foreign currency translation adjustment | $800 | $0 | $800 | | **Total** | **$571** | **($12,104)** | **($11,533)** | [NOTE 12: REVENUE RECOGNITION](index=21&type=section&id=NOTE%2012%3A-%20REVENUE%20RECOGNITION) Total revenue decreased to **$141.4 million** in the first half of 2022, driven by a decline in Systems revenue and a significant drop in U.S. sales, partially offset by EMEA growth Revenue by Source (in thousands USD) | Revenue Source | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Systems | $78,198 | $89,298 | | Ink and consumables | $41,882 | $40,823 | | Services & Subscriptions | $21,349 | $17,668 | | **Total revenue** | **$141,429** | **$147,789** | Revenue by Geography (in thousands USD) | Geography | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | U.S | $70,992 | $98,310 | | EMEA | $48,583 | $33,526 | | Asia Pacific | $13,473 | $10,815 | | Other | $8,381 | $5,138 | | **Total revenue** | **$141,429** | **$147,789** | [NOTE 13: TAXES ON INCOME](index=22&type=section&id=NOTE%2013%3A-%20TAXES%20ON%20INCOME) The company's effective tax rate is influenced by varying foreign subsidiary tax rates and deferred tax benefits recognized in Israel - The company's effective tax rate is influenced by different tax rates across its foreign subsidiaries and deferred tax benefits in Israel[65](index=65&type=chunk) [NOTE 14: BALANCES AND TRANSACTIONS WITH RELATED PARTIES](index=23&type=section&id=NOTE%2014%3A-%20BALANCES%20AND%20TRANSACTIONS%20WITH%20RELATED%20PARTIES) The company conducts transactions with related parties, including logistics services from Fritz Companies Israel, with fees totaling **$2.3 million** in the first half of 2022 - The company has ongoing business relationships with entities affiliated with its Chairman of the Board and other board members[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - Logistic service fees paid to Fritz Companies Israel, a related party, amounted to **$2.3 million** in the first six months of 2022[68](index=68&type=chunk)

Company Overview - Kornit Digital aims to become the operating system for sustainable on-demand fashion[3,7] - The company targets $1 billion in revenue by 2026[7,71] - Kornit boasts a significant customer base of over 1,200[9] Market and Technology - The traditional supply chain is broken, with excess production accounting for 30% of the issues[13] - The company estimates the decorated apparel market TAM (Total Addressable Market) at 21 billion impressions in DTG (Direct-to-Garment)[60] - Kornit projects 31 billion impressions by the end of 2026[10,60] - The DTF (Direct-to-Film) market TAM is estimated at 39 billion square meters[60] - The company projects 42 billion square meters in 2026[10,60] Sustainability Initiatives - By 2026, Kornit technology aims to enable the responsible production of approximately 2.5 billion apparel items[55] - This initiative is projected to save 4.3 trillion liters of water[55] - It also aims to reduce 17.2 billion kilograms of greenhouse gas emissions[55] - Overproduction in the fashion industry is expected to be reduced by 1.1 billion apparel items[55] Financial Performance - The company is targeting a gross margin of 50%-54% and an operating margin of over 20% by 2026[71,73,78]

Financial Data and Key Metrics Changes - The company reported second quarter revenues of $58.1 million, which was impacted by approximately $4.5 million of noncash warrants related to a global strategic account, aligning with preliminary revenue expectations [6][15] - Non-GAAP gross margin for the second quarter was 38.6%, down from 48.2% in the same period last year, primarily due to lower systems revenues in the Americas [15][16] - Non-GAAP net loss for the second quarter was $15.6 million, or a loss of $0.31 per basic share, compared to a net income of $10.5 million, or $0.22 per diluted share, in the same period last year [19] Business Line Data and Key Metrics Changes - DTG systems revenues fell short of expectations, particularly in the Americas, while consumables revenues met expectations [6][15] - The company anticipates consumables to grow sequentially throughout the remainder of 2022, driven by customer preparations for peak season [8][21] Market Data and Key Metrics Changes - EMEA and Asia Pacific regions showed good growth in the first half of the year, with EMEA's pipeline improving and Asia Pacific opening up post-lockdowns [8][9] - In the Americas, particularly Latin America, demand is increasing, especially for the press to MAX [9][10] Company Strategy and Development Direction - The company is focusing on three key areas: helping brands understand the benefits of on-demand production, ensuring successful rollout of new products, and returning to profitability [11][12] - A share repurchase program of up to $75 million was authorized to return value to shareholders while maintaining growth plans [13][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while the operating environment remains uncertain, opportunities for growth are intact, particularly with new product launches and customer expansions [10][12] - The company expects revenues for Q3 to be between $66 million to $70 million, with a similar outlook for Q4, driven by consumables and services [22][21] Other Important Information - The company announced a leadership transition with Lauri Hanover set to become the new CFO in November [14][25] - The acquisition of Tesoma was completed during the quarter, contributing to an increase in employee count [19][20] Q&A Session Summary Question: Update on hardware units sold and potential Q4 shortfall - Management confirmed that systems delayed from Q2 are expected to be shipped and recognized in H2, with good visibility on site readiness [31][32] Question: Growth expectations for consumables in Q3 and Q4 - Management expects sequential growth in consumables for both quarters, although at a lower pace compared to previous years [33] Question: Visibility into order pipeline for 2023 - Management indicated it is too early to provide guidance for 2023, but there is strong visibility for global strategic accounts [36][38] Question: Operating expenses and margin improvement - Management expects operating margins to improve in Q3 and Q4 due to a higher mix of consumables and operational efficiencies [40][41] Question: Long-term revenue target confidence - Management expressed confidence in the fundamentals of the company and the potential for significant growth, aiming for $1 billion in revenue by 2026 [45][46] Question: Customer interest in Apollo machine - Management highlighted strong demand for the Apollo, particularly for short to mid-run production, emphasizing its efficiency and cost-effectiveness [49][51] Question: Impact of market conditions on customer plans for upgrades - Management noted that while some upgrades were delayed, there is a normalization in customer demand, with expectations for strong upgrade activity in Q3 and 2023 [55][56] Question: KornitX business impact from market slowdown - Management stated that KornitX remains a core strategy, with ongoing improvements and customer engagement [58] Question: Product introductions and revenue drivers - Management indicated that Atlas MAX is gaining traction, while DTF technology is becoming increasingly significant for revenue [62][63]

1 ©2022 Kornit Digital. All rights reserved. Kornit Digital bordine KORNIT DIGITAL (NASDAQ: KRNT) BECOMING THE OPERATING SYSTEM FOR SUSTAINABLE ON-DEMAND FASHIONX 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," "p ...

Financial Performance - First quarter revenues were $83.3 million, representing a 26% year-over-year increase, net of an $8.0 million non-cash warrants impact[4] - GAAP net loss for the first quarter was $5.2 million, or $0.10 per basic share, compared to a net income of $5.1 million, or $0.11 per share, in the prior year[9] - Non-GAAP operating loss for the first quarter was $0.7 million, net of the $8.0 million attributed to the non-cash impact of warrants[4] - Total revenues for the three months ended March 31, 2022, were $83,293,000, a 25.9% increase from $66,123,000 in the same period of 2021[21] - Gross profit for the same period was $33,402,000, compared to $30,410,000 in 2021, reflecting an increase of 6.5%[21] - Operating expenses increased to $40,307,000 from $27,301,000, representing a 47.8% rise year-over-year[21] - The company reported a net loss of $5,197,000 for Q1 2022, compared to a net income of $5,099,000 in Q1 2021[21] - Basic and diluted net loss per share was $(0.10) for Q1 2022, down from $0.11 in Q1 2021[21] - Non-GAAP net income for Q1 2022 was $166,000, significantly lower than $7,730,000 in Q1 2021[24] - Cash flows from operating activities showed a net cash used of $47,082,000 in Q1 2022, compared to cash provided of $5,119,000 in Q1 2021[28] - Cash and cash equivalents at the end of Q1 2022 were $77,284,000, down from $94,171,000 at the end of Q1 2021[28] - The weighted average number of shares used in computing diluted net loss per share was 49,658,028 for Q1 2022, compared to 47,568,215 in Q1 2021[24] Future Projections - The company expects second quarter revenue to be in the range of $85 million to $95 million, with non-GAAP operating income projected between -2% to +2% of revenue[7] - The company anticipates stronger revenues in the third and fourth quarters compared to the second quarter, with operating margins expected in the low to mid-teens[8] - Kornit Digital aims to achieve a $125 million run-rate business by the fourth quarter of 2023 and is on a path to become a billion-dollar business by 2026[3] Product Development - Kornit Digital introduced groundbreaking new products, including Atlas MAX Poly and Kornit Apollo, during Kornit Fashion Week in Tel Aviv[4] - Kornit Digital continues to invest strategically in new product initiatives and go-to-market strategies to drive long-term growth[5] Regional Performance - The company reported record performance in the Asia Pacific region and strong results in EMEA and Americas[4] Financial Position - The company maintains a strong balance sheet with total assets of $1,026.1 million as of March 31, 2022[19] - The company invested $410,985,000 in bank deposits during Q1 2022, a significant increase from $18,855,000 in the previous year[28]

Financial Data and Key Metrics Changes - Total revenues for Q1 2022 grew by 26% year-over-year to $83.3 million, net of $8 million in warrants related to a global strategic account [5][11] - Non-GAAP gross margin was 41.5%, down from 47.1% in the same period last year, attributed to a higher mix of system sales and lower consumables revenues [13][18] - Non-GAAP net income for Q1 was $0.2 million or $0.00 per share, compared to $7.7 million or $0.16 per share in Q1 2021 [18] Business Line Data and Key Metrics Changes - System revenues were strong, particularly from Atlas and Presto systems, with services revenues increasing by 32% year-over-year to $10.8 million [11][12] - The Presto MAX system saw significant demand, especially in Europe and Asia Pacific, contributing to a strong DTF pipeline [7][12] - The Atlas MAX system adoption is increasing, with strong customer feedback and a growing backlog for upgrades [7][12] Market Data and Key Metrics Changes - Asia Pacific recorded a record quarter, with strong sales of both Atlas MAX and Presto systems [11][12] - EMEA had one of its best quarters ever, driven by upgrades from Atlas MAX and strong interest in KornitX [12] - In the Americas, new customers included a major swim and sports apparel company, indicating strong market penetration [12] Company Strategy and Development Direction - The company aims to build the operating system for on-demand fashion, focusing on sustainability and local production to mitigate supply chain issues [10][37] - KornitX is expected to drive significant growth, with partnerships like Wix enhancing demand generation [7][39] - The introduction of new products, including the Atlas Poly and Apollo, is anticipated to strengthen market position and revenue in H2 2022 [10][31] Management's Comments on Operating Environment and Future Outlook - Management noted macroeconomic volatility affecting consumer purchases and capital allocation decisions, leading to some delays in system purchases [9][30] - Despite near-term challenges, the company remains confident in achieving a $1 billion business by 2026, supported by strong fundamentals and a robust pipeline [10][31] - The second half of 2022 is expected to be stronger than the first half, driven by major orders and product introductions [20][31] Other Important Information - Total operating expenses for Q1 were $35.2 million, a 43% increase year-over-year, reflecting continued investment in R&D and marketing [15][16] - The company ended Q1 with a cash balance of $734 million, a decrease of approximately $64 million from the previous quarter [18][19] Q&A Session Summary Question: Is the slowdown primarily related to the global strategic customer or other accounts? - The slowdown is mixed, primarily from the e-commerce segment, while the global strategic account continues to show tremendous growth [24][25] Question: What gives confidence for improvement in the second half of the year? - Confidence stems from a strong backlog, major product introductions, and historical trends showing stronger performance in H2 [29][31] Question: How is the interest in print technology compared to last quarter? - There is accelerated engagement and growth, particularly in EMEA, with major brands adopting Kornit technology [36][37] Question: What is the outlook for KornitX and its ramp-up? - KornitX is expected to see meaningful revenue growth in H2 2022, with partnerships enhancing demand generation [39][40] Question: Are there concerns about competition from screen-printing equipment manufacturers? - There is confidence in Kornit's technology and market position, with a strong moat around its products [41][42] Question: Can you provide updates on relationships with Fanatics and Delta Apparel? - Both relationships remain strong, with Fanatics shifting to an outsourced production model and Delta Apparel testing competitor systems [72][73]