Kornit Digital Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the provided filing text does not give clear Q4-only financial results. Financial statements are prepared under U.S. GAAP. Amounts below are in U.S. dollars unless noted.
Business context
Kornit develops digital textile-printing systems, inks and consumables, software, and related services for the global textile industry. Its strategy centers on shifting production from analog methods to digital, on-demand manufacturing. In 2021 it introduced MAX printing technology and the Presto MAX direct-to-fabric system, and established KornitX, a cloud-based workflow and fulfillment platform.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $322.0 million | $193.3 million |
| Gross profit / margin | $151.9 million / 47.2% | $87.8 million / 45.4% |
| Operating income (loss) / margin | $12.8 million / 4.0% | $(6.7) million / (3.5)% |
| Net income (loss) | $15.5 million | $(4.8) million |
| Diluted earnings (loss) per share | $0.32 | $(0.11) |
| Cash from operating activities | $53.6 million | $32.4 million |
- Revenue increased 66.6%. Systems revenue rose to $181.4 million from $87.8 million; ink and consumables revenue rose 31.2% to $101.2 million; service revenue rose 38.7% to $39.4 million.
- Management attributed the higher gross margin principally to increased sales of Atlas and Atlas MAX systems and the contribution from ink and consumables. Operating expenses increased 47.2% in total, but declined to 43.2% of revenue from 48.9%.
- At year-end, cash and cash equivalents were $611.6 million, short-term deposits $9.2 million, and marketable securities $177.4 million, totaling $798.1 million. Current assets were $775.3 million and current liabilities $96.7 million.
- The company reported no borrowings outstanding; its $1.1 million bank credit line was undrawn. It had $27.0 million of operating lease liabilities and $63.6 million in vendor purchase commitments, primarily due within one year.
- Capital expenditures were $14.5 million. Operating cash flow was supported by earnings and noncash expenses, while inventory growth and reduced deferred revenue and customer advances were cash uses.
Material changes versus FY2020
- Revenue more than recovered from the prior-year level, and the company returned to operating and net profitability after FY2020 losses.
- Amazon-related revenue increased to $87.0 million, or 27% of total revenue, from $21.1 million, or 11%, in 2020. The ten largest customers represented 57% of revenue versus 55%.
- The fair value of Amazon warrants reduced recognized revenue by $25.4 million in 2021, compared with $5.4 million in 2020. The filing reports $83.7 million of additional warrant-related revenue reductions yet to be recognized.
- Cash and cash equivalents increased from $125.8 million to $611.6 million, primarily reflecting the November 2021 follow-on offering, which generated $339.8 million of net proceeds. Shares outstanding rose to 49.6 million from 46.0 million.
- Inventory increased to $63.0 million from $52.5 million. Days sales outstanding improved to 56 days from 98 days, according to management.
Outlook, commentary, and risks
- No specific numerical revenue or earnings guidance is provided in the supplied filing text. Management said cash from operations and existing resources should cover anticipated requirements for at least 12 months without drawing on credit lines or using significant offering proceeds.
- Management sees industry digitization, e-commerce, on-demand production, and nearshoring as potential growth drivers. It also cautions that continued growth and profitability depend on successful product launches, market acceptance, and execution of expansion plans.
- Supply-chain constraints, limited-source suppliers—including the sole supplier of print heads—and dependence on Israeli manufacturing could delay production or deliveries. COVID-19 disruptions and Russia’s invasion of Ukraine were cited as risks to supply chains and international operations.
- Customer concentration is material: Amazon represented 27% of revenue, and its purchase agreement has no minimum spending commitment. The agreement includes rebates, service-level obligations, and extended product-support requirements.
- Other notable risks include competition and adoption rates for digital textile printing; seasonal and quarterly revenue variability; currency exposure, particularly to the Israeli shekel; cybersecurity and ERP implementation; and Israeli tax benefits and restrictions tied to government R&D grants.
- Unusual items and commitments include the $339.8 million follow-on offering, acquisitions of Voxel8 for $15.0 million and Custom Gateway for $16.9 million, and the announced 2022 Tesoma acquisition for approximately €11 million. The Kiryat Gat manufacturing facility was completed in January 2022; total land, construction, design, and production-line costs were estimated at approximately $22 million.
- The auditor issued unqualified opinions on the financial statements and internal controls. Management also concluded that disclosure controls and internal control over financial reporting were effective at year-end.
Most important facts for investors to verify
- Whether the sharp increase in Amazon sales is durable, and how Amazon’s concentration, purchase terms, rebates, and warrant accounting affect future reported revenue and margins.
- Whether growth in systems sales converts into sustained ink, consumables, and service revenue, particularly as newer systems may use less consumables per system.
- Whether supply constraints, supplier commitments, and production capacity can support demand without material delivery delays or cost increases.
- How management deploys the substantial cash balance, including acquisition spending, capital investment, and any future equity issuance or dilution.
- Whether inventory levels and the associated obsolescence estimates remain appropriate as product technology and demand change; inventory valuation was identified as a critical audit matter.
- Progress on the Tesoma acquisition, the new Kiryat Gat facility and its lease arrangements, and compliance with Israeli tax-benefit and Innovation Authority requirements.