Kornit Digital(KRNT) - 2024 Q3 - Quarterly Report

Executive Summary & Business Highlights This section provides an overview of Kornit Digital's third-quarter 2024 performance, strategic direction, and company profile Third Quarter 2024 Key Highlights Kornit Digital reported Q3 revenues of $50.7 million, a GAAP net loss of $0.9 million, and a non-GAAP net income of $5.5 million, demonstrating improved margins and adjusted EBITDA profitability Q3 2024 Financial Metrics | Metric | Q3 2024 | Q3 2023 | Change (YoY) | | :----- | :------ | :------ | :----------- | | Revenues | $50.7 million | $59.2 million | -14.3% | | GAAP Net Loss | $0.9 million | $8.2 million | Improved | | Non-GAAP Net Income (Loss) | $5.5 million | ($3.4 million) | Improved | | Non-GAAP Gross Margin | 50.3% | 37.4% | +12.9 pp | | Adjusted EBITDA | $1.5 million | ($5.6 million) | Improved | | Adjusted EBITDA Margin | 2.9% | -9.5% | +12.4 pp | - Continued positive cash generation from operations[3] - Industry-leading platforms, Apollo and Atlas MAX, continue to gain adoption among screen-replacement customers, driven by the new AIC model[3] CEO Commentary and Strategic Direction CEO Ronen Samuel highlighted Q3 operational progress, including gross margin expansion and return to adjusted EBITDA profitability, driven by successful product adoption and a revamped go-to-market strategy - Achieved gross margin expansion, returned to adjusted EBITDA profitability, and maintained positive cash generation as planned[4] - Apollo and MAX-powered products combined with revamped go-to-market and All-Inclusive-Click (AIC) model are expanding the serviceable market[5] - Announced new customers (Print Palace, Custom Ink) shifting production from screen to digital-direct-to-garment, and core customers (Monster Digital, Mad Engine Global, DO Apparel) expanding their on-demand digital production fleets[5] - Entering 2025 with the right products and model, focused on executing the plan laid out at the September Investor Event[5] About Kornit Digital Kornit Digital is a global leader in sustainable, on-demand digital fashion and textile production, offering end-to-end solutions and serving customers in over 100 countries - Worldwide market leader in sustainable, on-demand, digital fashion, and textile production technologies[12] - Offers end-to-end solutions: digital printing systems, inks, consumables, software, and fulfillment services through a global network[12] - Headquartered in Israel with offices in USA, Europe, and Asia Pacific, serving customers in over 100 countries[12] Third Quarter 2024 Financial Performance This section provides a detailed analysis of Kornit Digital's GAAP and non-GAAP financial results for Q3 2024, including statements of operations, balance sheets, and cash flows GAAP Financial Results This section details Kornit Digital's financial performance for the third quarter and first nine months of 2024 under Generally Accepted Accounting Principles (GAAP), presenting the consolidated statements of operations, balance sheets, and cash flows Consolidated Statements of Operations (GAAP) Q3 2024 total revenues decreased to $50.7 million, while gross profit increased to $24.2 million, and GAAP net loss significantly narrowed to $0.9 million from $8.2 million year-over-year Consolidated Statements of Operations (USD in thousands) | Metric (USD in thousands) | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | | :------------------------ | :------ | :------ | :------ | :------ | | Total Revenues | 50,732 | 59,224 | 143,129 | 163,201 | | Products Revenues | 36,996 | 45,486 | 100,375 | 117,472 | | Services Revenues | 13,736 | 13,738 | 42,754 | 45,729 | | Gross Profit | 24,210 | 20,620 | 60,633 | 52,385 | | Operating Loss | (7,123) | (14,658) | (36,105) | (59,712) | | Net Loss | (908) | (8,161) | (19,016) | (41,417) | | Basic Loss Per Share | (0.02) | (0.17) | (0.40) | (0.84) | | Diluted Loss Per Share | (0.02) | (0.17) | (0.40) | (0.84) | - Total revenue for Q3 2024 was $50.7 million, a decrease from $59.2 million in the prior year, primarily due to lower systems revenues[6][23] - GAAP gross profit margin for Q3 2024 was 47.7%, a significant improvement from 34.8% in Q3 2023[6] Consolidated Balance Sheets (GAAP) As of September 30, 2024, total assets were $850.8 million, with increased current assets driven by cash and marketable securities, and a reduction in total liabilities Consolidated Balance Sheets (USD in thousands) | Metric (USD in thousands) | Sep 30, 2024 (Unaudited) | Dec 31, 2023 (Audited) | | :------------------------ | :----------------------- | :--------------------- | | Total Assets | 850,791 | 865,580 | | Current Assets | 669,178 | 522,387 | | Cash and cash equivalents | 113,861 | 39,605 | | Marketable securities (current) | 217,949 | 57,292 | | Long-Term Assets | 181,613 | 343,193 | | Marketable securities (long-term) | 59,910 | 223,203 | | Total Liabilities | 57,286 | 69,913 | | Shareholders' Equity | 793,505 | 795,667 | Consolidated Statements of Cash Flows (GAAP) Net cash provided by operating activities significantly improved to $13.6 million in Q3 2024, contributing to a $91.3 million increase in cash and cash equivalents during the quarter Consolidated Statements of Cash Flows (USD in thousands) | Metric (USD in thousands) | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | | :------------------------ | :------ | :------ | :------ | :------ | | Net Cash Provided by (Used in) Operating Activities | 13,554 | (7,728) | 22,062 | (37,276) | | Net Cash Provided by (Used in) Investing Activities | 77,966 | (1,556) | 62,201 | 45,877 | | Net Cash Used in Financing Activities | (181) | (15,750) | (10,007) | (36,910) | | Increase (Decrease) in Cash and Cash Equivalents | 91,339 | (25,034) | 74,256 | (28,309) | | Cash and Cash Equivalents at End of Period | 113,861 | 76,288 | 113,861 | 76,288 | Non-GAAP Financial Results and Reconciliations This section presents Kornit Digital's financial performance adjusted for specific non-cash and non-recurring items, offering a clearer view of core operational results Non-GAAP Financial Measures Disclosure Kornit Digital uses non-GAAP measures, including Adjusted EBITDA, to exclude specific non-cash and non-recurring items, providing a clearer view of core operational performance for management and investors - Non-GAAP measures exclude share-based compensation, amortization of intangible assets, restructuring expenses, foreign exchange differences (ASC 842), and non-cash deferred tax income[15] - Adjusted EBITDA is defined as non-GAAP operating income (loss) excluding depreciation expense[16] - Purpose is to convey performance exclusive of non-cash charges and other items outside core operating results, used for planning, forecasting, and internal evaluation[17] Reconciliation of GAAP to Non-GAAP Statements of Operations Q3 2024 non-GAAP gross profit increased to $25.5 million, with operating expenses decreasing by 14%, resulting in a non-GAAP net income of $5.5 million or $0.11 per diluted share Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (USD in thousands) | Metric (USD in thousands) | Q3 2024 (Non-GAAP) | Q3 2023 (Non-GAAP) | 9M 2024 (Non-GAAP) | 9M 2023 (Non-GAAP) | | :------------------------ | :----------------- | :----------------- | :----------------- | :----------------- | | Non-GAAP Cost of Revenues | 25,207 | 37,078 | 77,554 | 106,332 | | Non-GAAP Gross Profit | 25,525 | 22,146 | 65,575 | 56,869 | | Non-GAAP Operating Expenses | 26,815 | 31,111 | 81,835 | 97,612 | | Non-GAAP Net Income (Loss) | 5,539 | (3,427) | 1,386 | (24,227) | | Non-GAAP Diluted EPS | 0.11 | (0.07) | 0.03 | (0.49) | - Non-GAAP operating expenses decreased by 14% to $26.8 million in Q3 2024 compared to the prior year period[7] Reconciliation of GAAP Net Income to Adjusted EBITDA Kornit Digital achieved an Adjusted EBITDA of $1.5 million in Q3 2024, a significant turnaround from a $5.6 million loss in Q3 2023, with the margin improving to 2.9% Reconciliation of GAAP Net Income to Adjusted EBITDA (USD in thousands) | Metric (USD in thousands) | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 | | :------------------------ | :------ | :------ | :------ | :------ | | GAAP Net Loss | (908) | (8,161) | (19,016) | (41,417) | | Non-GAAP Operating Loss | (1,290) | (8,965) | (16,260) | (40,743) | | Adjusted EBITDA | 1,451 | (5,623) | (8,028) | (31,060) | - Adjusted EBITDA margin for Q3 2024 was 2.9%, a significant improvement from -9.5% for Q3 2023[8] Financial Outlook This section provides Kornit Digital's financial guidance for the fourth quarter of 2024, including projected revenues and adjusted EBITDA margin Fourth Quarter 2024 Guidance For Q4 2024, Kornit Digital projects revenues between $58 million and $63 million, with an adjusted EBITDA margin of 12% to 16% Q4 2024 Guidance | Metric | Q4 2024 Guidance | | :----- | :--------------- | | Revenues | $58 million to $63 million | | Adjusted EBITDA Margin | 12% to 16% | Additional Information This section provides details on the earnings conference call and important disclosures regarding forward-looking statements Earnings Conference Call Information Kornit Digital held a conference call on November 6, 2024, to discuss Q3 results, with a webcast and telephonic replay available for access - Conference call held on November 6, 2024, at 8:30 a.m. ET to discuss results[10] - Live webcast accessible at ir.kornit.com; telephonic replay available until November 20, 2024[10][11] Forward-Looking Statements This section outlines forward-looking statements, emphasizing their reliance on management's assumptions and inherent susceptibility to various risks and uncertainties - Forward-looking statements are characterized by terms like 'will,' 'expects,' 'anticipates,' and are not guarantees of future performance[14] - Based on management's assumptions and perceptions of historical trends, current conditions, and future developments[14] - Subject to risks and uncertainties, including adverse macro-economic headwinds, success of new products (Poly Pro, Presto, Apollo), ability to consummate large sales, and competition[14]