Kornit Digital Ltd. (NASDAQ:KRNT) Q1 2023 Earnings Conference Call May 10, 2023 8:30 AM ET Company Participants Andrew G. Backman - Global Head of Investor Relations Ronen Samuel - Chief Executive Officer Lauri Hanover - Chief Financial Officer Conference Call Participants Tavy Rosner - Barclays Erik Woodring - Morgan Stanley Chris Moore - CJS Securities Jared Maymon - Berenberg Capital Markets Danny Eggerichs - Craig-Hallum Operator Greetings, and welcome to Kornit Digital's First Quarter 2023 Earnings Con ...

Earnings Conference Call Supporting Slides May 10, 2023 Lauri Hanover CFO SAFE HARBOR This presentation contains statistical data that we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified this statistical data. BUSINESS 4 ©2023 Kornit Digital. All rights reserved. • Promising indicators emerged in certain parts of our business, despite macro pressures in operating environment • Gl ...

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, 2022 OR (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Secu ...

Kornit Digital Ltd. (NASDAQ:KRNT) Q4 2022 Earnings Conference Call February 15, 2023 8:30 AM ET Company Participants Andrew Backman - Global Head of Investor Relations Ronen Samuel - Chief Executive Officer Lauri Hanover - Chief Financial Officer Amir Shaked-Mandel - Executive Vice President of Corporate Development Conference Call Participants Jim Suva - Citigroup Tavy Rosner - Barclays Brian Drab - William Blair Erik Woodring - Morgan Stanley James Ricchiuti - Needham & Company Chris Moore - CJS Securitie ...

• 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]