Kornit Digital Ltd 6-K, filed Sep 29, 2022
Kornit Digital Ltd. (KRNT)
About this 6-K
Kornit Digital Ltd filed this 6-K on September 29, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the month of September
Commission
File Number
(Translation of Registrant’s name into English)
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
CONTENTS
Report on 2022 First-Half Results
This Report of Foreign Private Issuer on Form 6-K (this “Form 6-K”) is being furnished by Kornit Digital Ltd. (“Kornit”) to the Securities and Exchange Commission (the “SEC”) for the sole purposes of furnishing:
| (i) | unaudited interim consolidated financial statements of Kornit as of, and for the six month period ended, June 30, 2022 (the “Financial Statements”) (which serve as Exhibit 99.1 to this Form 6-K); and |
| (ii) | Operating and Financial Review and Prospects, which contains Kornit’s management’s discussion and analysis of Kornit’s financial condition and results of operations as of, and for the six month period ended, June 30, 2022 (and which serves as Exhibit 99.2 to this Form 6-K). |
1
Exhibits
Exhibit Index
| Exhibit Number | Document Description | |
| 99.1 | Unaudited condensed interim consolidated financial statements of Kornit as of, and for the six month period ended, June 30, 2022 | |
| 99.2 | Operating and Financial Review and Prospects of Kornit as of, and for the six month period ended, June 30, 2022 | |
| EX-101.INS | XBRL Taxonomy Instance Document | |
| EX-101.SCH | XBRL Taxonomy Extension Schema Document | |
| EX-101.CAL | XBRL Taxonomy Calculation Linkbase Document | |
| EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| EX-101.LAB | XBRL Taxonomy Label Linkbase Document | |
| EX-101.PRE | XBRL Taxonomy Presentation Linkbase Document |
Incorporation by Reference
The foregoing six-month unaudited condensed interim consolidated financial statements, and Operating and Financial Review and Prospects covering that six month period, are incorporated by reference into Kornit’s registration statements on Form F-3 (File No. 333-248784) and Form S-8 (File Nos. 333-203970, 333-214015, 333-217039, 333-223794, 333-230567, 333-237346, 333-254749, and 333-263975).
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KORNIT DIGITAL LTD. | ||
| Date: September 29, 2022 | By: | /s/ Alon Rozner |
| Name: | Alon Rozner | |
| Title: | Chief Financial Officer | |
3
Exhibit 99.1
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2022
UNAUDITED
U.S. DOLLARS IN THOUSANDS
INDEX
- - - - - - - - - - - - -
1
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term bank deposits | ||||||||
| Marketable securities | ||||||||
| Trade receivables, net | ||||||||
| Inventories | ||||||||
| Other accounts receivable and prepaid expenses | ||||||||
| Total current assets | ||||||||
| LONG-TERM ASSETS: | ||||||||
| Marketable securities | ||||||||
| Deposits and other long-term assets | ||||||||
| Severance pay fund | ||||||||
| Deferred taxes | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
2
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS (Cont.)
U.S. dollars in thousands, except share and per share data
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | Audited | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Trade payables | $ | $ | ||||||
| Employees and payroll accruals | ||||||||
| Deferred revenues and advances from customers | ||||||||
| Operating lease liabilities | ||||||||
| Other payables and accrued expenses | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES: | ||||||||
| Accrued severance pay | ||||||||
| Operating lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total long-term liabilities | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Ordinary shares of NIS | ||||||||
| Additional paid in capital | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Retained earnings | ||||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
3
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Revenues | ||||||||
| Products | $ | $ | ||||||
| Services | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Products | ||||||||
| Services | ||||||||
| Total cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Research and development, net | ||||||||
| Seles and marketing | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating income (loss) | ( | ) | ||||||
| Finance income, net | ||||||||
| Income (loss) before taxes on income (tax benefit) | ( | ) | ||||||
| Taxes on income (tax benefit) | ( | ) | ||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Basic earnings (losses) per share | $ | ( | ) | $ | ||||
| Diluted earnings (losses) per share | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
4
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S. dollars in thousands
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Other comprehensive income (loss): | ||||||||
| Change in unrealized gains (losses) on marketable securities: | ||||||||
| Unrealized gains (losses) arising during the period, net of tax benefit of $( | ( | ) | ( | ) | ||||
| Gains reclassified into net income (loss), net of tax | ||||||||
| Net change | ( | ) | ( | ) | ||||
| Change in unrealized gains (losses) on cash flow hedges: | ||||||||
| Unrealized losses arising during the period, net of tax benefit of $( | ( | ) | ( | ) | ||||
| Gains reclassified into net income, net of tax | ||||||||
| Net change | ( | ) | ||||||
| Total other comprehensive loss, net of tax | ( | ) | ( | ) | ||||
| Comprehensive income (loss) | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
5
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
U.S. dollars in thousands, except share data
| Ordinary shares | Accumulated | |||||||||||||||||||||||
| Number of shares outstanding | Amount | Additional paid in capital | other comprehensive income (loss) | Retained earnings | Total Shareholders’ equity | |||||||||||||||||||
| Balance as of January 1, 2022 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Exercise of options and vesting of restricted stock units | ||||||||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||
| Warrants to customers | - | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | - | ( | ) | ||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Ordinary shares | Accumulated | |||||||||||||||||||||||
| Number of shares outstanding | Amount | Additional paid in capital | other comprehensive income (loss) | Retained earnings | Total Shareholders’ equity | |||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Exercise of options and vesting of restricted stock units | ||||||||||||||||||||||||
| Share-based compensation | - | |||||||||||||||||||||||
| Warrants to customers | - | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
6
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Fair value of warrants deducted from revenues | ||||||||
| Share-based compensation | ||||||||
| Amortization of premium and accretion of discount on marketable securities, net | ( | ) | ||||||
| Realized gain on sale and redemption of marketable securities | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Trade receivables, net | ( | ) | ( | ) | ||||
| Other accounts receivables and prepaid expenses | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Operating leases right-of-use assets and liabilities, net | ( | ) | ( | ) | ||||
| Deferred taxes | ( | ) | ||||||
| Deposits and other long-term assets | ( | ) | ( | ) | ||||
| Trade payables | ( | ) | ( | ) | ||||
| Employees and payroll accruals | ( | ) | ||||||
| Deferred revenues and advances from customers | ( | ) | ( | ) | ||||
| Other payables and accrued expenses | ||||||||
| Accrued severance pay, net | ( | ) | ||||||
| Other long-term liabilities | ||||||||
| Loss from sale and disposal of property plant and Equipment | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Investing in equity securities | ( | ) | ||||||
| Acquisition of intangible assets | ( | ) | ||||||
| Proceeds from sale of property, plant and equipment | ||||||||
| Cash paid in connection with acquisition, net of cash acquired | ( | ) | ||||||
| Investment in bank deposits | ( | ) | ( | ) | ||||
| Proceeds from sales and redemption of marketable securities | ||||||||
| Proceeds from maturity of marketable securities | ||||||||
| Investment in marketable securities | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Exercise of employee stock options | ||||||||
| Payments related to shares withheld for taxes | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at the beginning of the period | ||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
7
KORNIT DIGITAL LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
U.S. dollars in thousands
| Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Purchase of property, plant and equipment acquired in credit | $ | $ | ||||||
| Inventory transferred to be used as property and equipment | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited interim consolidated financial statements.
8
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 1:- | GENERAL |
| a. | Kornit Digital Ltd. (the “Company”) was incorporated in 2002 under the laws of the State of Israel. The Company and its subsidiaries develop, design and market digital printing solutions for the global printed textile industry. The Company’s and its subsidiaries’ solutions are based on their proprietary digital textile printing systems, ink and other consumables, associated software and value-added services. |
| b. | The Company established wholly owned subsidiaries in Israel, the United States, Germany, Hong Kong, Japan and the United Kingdom. The Company’s subsidiaries are engaged primarily in services, sales, and marketing, except for the Israeli subsidiary which is engaged primarily in research and development, and manufacturing. |
| c. | The Company depends on four major suppliers to supply certain components for the production of its products. If one of these suppliers fails to deliver or delays the delivery of the necessary components, the Company will be required to seek alternative sources of supply. A change in these suppliers could result in manufacturing delays, which could cause a possible loss of sales and, consequently, could adversely affect the Company’s results of operations and financial position. |
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
| a. | Unaudited interim consolidated financial statements: |
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s consolidated financial statements.
The balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements of the Company at that date but does not include all information and footnotes required by U.S. GAAP for complete financial statements.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2022. The significant accounting policies applied in the Company’s audited 2021 consolidated financial statements and notes thereto included in the Annual Report are applied consistently in these unaudited interim consolidated financial statements.
| b. | Use of estimates: |
The preparation of the unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements and the reported amounts of revenues and expenses during the period.
9
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. Actual results could differ from those estimates.
On an ongoing basis, the Company’s management evaluates estimates, including those related to intangible assets and goodwill, tax assets and liabilities, fair values of stock-based awards, inventory write-offs, warranty provision, allowance for credit losses and provision for rebates and returns. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
| c. | Cloud Computing Arrangement Implementation Costs: |
The
Company capitalized certain implementation costs incurred in a cloud computing arrangement during the application development stage
pursuant to Accounting Standards Codification, or ASC, 350-40, Internal Use Software. These costs are amortized over the
term of the hosting arrangement on a straight-line basis and are included within operating expenses in the consolidated statements
of operations. Costs incurred in the preliminary stages of development are analogous to research and development activities and are
expensed as incurred. These capitalized costs are included in deposits and other long-term assets in
the consolidated balance sheets. As of June 30, 2022 the Company capitalized $
| NOTE 3:- | BUSINESS COMBINATIONS |
On April 5, 2022, the Company,
through its wholly owned subsidiary Kornit Digital Technologies, acquired all of the outstanding shares of Tesoma GMBH, a German manufacturer
of continuous dryers and oven systems. Under the related acquisition agreement, the total consideration was $
Tesoma generates revenues from several streams such as: industry solutions, glass, textile, service, graphics and sheet metal working. Tesoma focuses on several markets, including textile, mechanical engineering and automotive.
The Company believes this acquisition will strategically accelerate its value proposition for fulfillers in the area of dryers for the textile industry.
The Tesoma acquisition was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) 805 “Business Combinations”. ASC 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date, measured at their fair values as of that date. The excess of the fair value of the purchase price over the fair values of the identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Acquisition related costs are expensed to the statement of operations in the period incurred.
10
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 3:- | BUSINESS COMBINATIONS (Cont.) |
Under business combination accounting principles, the total purchase price was allocated to Tesoma’s net tangible and intangible assets based on their estimated fair values as set forth below. The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill.
The preliminary fair value estimates for the intangible assets acquired as part of the Tesoma acquisition were based upon preliminary calculations and valuations, and the estimates and assumptions for this acquisition are subject to change as the Company obtains additional information during the respective measurement period to the information that existed as of the acquisition date (up to one year from the acquisition date). The following table summarizes the purchase price allocation of Tesoma Acquisition:
| Fair value | Amortization period (years) | |||||
| Tangible assets (liabilities): | ||||||
| Cash | $ | |||||
| Accounts receivable and other receivables | ||||||
| Inventory | ||||||
| Property and equipment | ||||||
| Other assets | ||||||
| Advance from customers | ( | ) | ||||
| Trade payables | ( | ) | ||||
| Provisions and other liabilities | ( | ) | ||||
| Deferred tax liabilities, net | ( | ) | ||||
| Net assets | ||||||
| Intangible assets: | ||||||
| Technology | ||||||
| Customer Relationship | ||||||
| Backlog | ||||||
| Goodwill | ||||||
| Total purchase price | $ | |||||
Goodwill is primarily attributable to expected synergies arising from technology integration and expanded product availability to the Company’s existing and new customers. Goodwill is not deductible for income tax purpose.
Pro forma results of operations related to this acquisition have not been prepared because they are not material to the Company’s unaudited interim consolidated statements of operations.
11
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 4:- | MARKETABLE SECURITIES |
The following tables summarize our marketable securities by significant investing categories as of the balance sheet dates indicated below:
| June 30, 2022 | ||||||||||||||||
| Amortized cost | Gross unrealized gain | Gross unrealized loss | Fair value | |||||||||||||
| Matures within one year: | ||||||||||||||||
| Corporate debentures | $ | $ | $ | ( | ) | $ | ||||||||||
| Government debentures | - | ( | ) | |||||||||||||
| ( | ) | |||||||||||||||
| Matures after one year through three years: | ||||||||||||||||
| Corporate debentures | ( | ) | ||||||||||||||
| Government debentures | - | ( | ) | |||||||||||||
| ( | ) | |||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| December 31, 2021 | ||||||||||||||||
Amortized Cost | Gross unrealized gain | Gross unrealized loss | Fair value | |||||||||||||
| Matures within one year: | ||||||||||||||||
| Corporate debentures | $ | $ | $ | - | $ | |||||||||||
| Government debentures | ||||||||||||||||
| - | ||||||||||||||||
| Matures after one year through three years: | ||||||||||||||||
| Corporate debentures | ( | ) | ||||||||||||||
| Government debentures | ( | ) | ||||||||||||||
| ( | ) | |||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
As of June 30, 2022, investments with continuous unrealized losses for less than 12 months, and 12 months or greater, and their related fair values, were as follows:
| June 30, 2022 | ||||||||||||||||||||||||
| Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
| Fair value | Unrealized losses | Fair value | Unrealized losses | Fair value | Unrealized losses | |||||||||||||||||||
| Corporate debentures | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| Government debentures | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
12
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 5:- | FAIR VALUE MEASUREMENTS |
The Company measures its marketable securities and foreign currency derivative contracts at fair value. Marketable securities and foreign currency derivative contracts are classified within Level II, as the valuation inputs are based on quoted prices and market observable data of similar instruments.
The below table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2022 and December 31, 2021, by level within the fair value hierarchy.
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| As of June 30, 2022 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities | $ | $ | $ | $ | | |||||||||||
| Foreign currency derivative contracts | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Marketable securities | $ | $ | $ | $ | ||||||||||||
| Foreign currency derivative contracts | ||||||||||||||||
| Total financial liabilities | $ | $ | $ | $ | ||||||||||||
| December 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities | $ | $ | $ | $ | ||||||||||||
| Foreign currency derivative contracts | ||||||||||||||||
| Total financial assets | $ | $ | $ | $ | ||||||||||||
| NOTE 6:- | INVENTORIES |
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials and components | $ | $ | ||||||
| Work in progress | ||||||||
| Finished products (*) | ||||||||
| $ | $ | |||||||
| (*) | Includes amounts of $ |
Inventory write-offs
amounted to $
13
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 7:- | DERIVATIVES AND HEDGING ACTIVITIES |
The Company follows FASB ASC No. 815, “Derivatives and Hedging,” which requires companies to recognize all of their derivative instruments as either assets or liabilities at fair value in the statement of financial position. Accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging transaction and further, on the type of hedging transaction. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. Due to the Company’s global operations, it is exposed to foreign currency exchange rate fluctuations in the normal course of its business. The Company uses derivative financial instruments, specifically foreign currency forward and option contracts (“Hedging Contracts”), to manage exposure to foreign currency risks, by hedging a portion of the Company’s forecasted expenses denominated in New Israeli Shekels expected to be incurred within a year. The effect of exchange rate changes on foreign currency hedging contracts is expected to partially offset the effect of exchange rate changes on the underlying hedged item.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains or losses from contracts that are not designated as hedging instruments are recognized in “financial income, net”.
| a. | Derivative instruments outstanding |
The following table summarizes the notional amounts for hedged items, when transactions are designated as hedge accounting:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Cash flow hedge | ||||||||
As of June 30, 2022, and December
31, 2021, the fair value of the Company’s outstanding forward and option contracts amounted to $
| b. | Derivative instrument gains and losses |
During the six months ended June 30,
2022 and 2021, the company recorded pretax expenses of $
The Company’s outstanding derivatives
designated as cash flow hedging instruments, and their related gains and losses, are reported in the statement of cash flows as cash flows
from operating activities. The maximum length of time over which the Company hedges its exposure to the variability in future cash flows
for forecasted transactions is less than 12 months. The estimated net amount of the existing unrealized loss that is reported in accumulated
other comprehensive income (loss) at the reporting date and expected to be reclassified into earnings within the next 12 months is $
14
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 8:- | COMMITMENTS AND CONTINGENT LIABILITIES |
| a. | Charges: |
As of June 30, 2022, the Company has
a line of credit with an Israeli bank for total borrowing of
As of June 30, 2022, the Company has not utilized its line of credit.
| b. | Purchase commitments: |
As of June 30, 2022,
the Company has purchase commitments for goods and services from vendors in an amount of approximately $
| c. | Litigation: |
From time to time, the Company is involved in various legal proceedings, claims and litigation that arise in the normal course of business. It is the opinion of management that the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
| d. | Royalty Commitments: |
Under the Company’s
agreement for purchasing print heads and other products, which was amended in 2016, the Company is obligated to pay
Royalty expenses
for the six months ended June 30, 2022 and 2021 were $
| e. | Guarantees: |
As of June 30, 2022,
the Company provided eight bank guarantees in a total amount of $
15
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 9:- | EARNINGS (LOSSES) PER SHARE |
The following table sets forth the computation of basic and diluted net earnings (losses) per share:
Six months ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Numerator for basic and diluted net earnings (losses) per share: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Weighted average shares outstanding: | ||||||||
| Denominator for basic earnings (losses) per share | ||||||||
| Effect of dilutive securities: | ||||||||
| Share options, warrants and restricted share units | ||||||||
| Denominator for diluted earnings (losses) per share | ||||||||
| Basic earnings (losses) per share | $ | ( | ) | $ | ||||
| Diluted earnings (losses) per share | $ | ( | ) | $ | ||||
The total number of shares related to the outstanding options and RSUs
excluded from the calculation of diluted earnings per share due to their anti-dilutive effect was
| NOTE 10:- | SHAREHOLDERS’ EQUITY |
Company’s shares:
| a. | Ordinary Shares: |
Any ordinary share confers equal rights to dividends and bonus shares, and to participate in the distribution of surplus assets upon liquidation, in proportion to the par value of such share, regardless of any premium paid thereon, subject to the provisions of the Company’s articles of association. Each ordinary share confers upon its holder the right to participate in the general meetings of the shareholders of the Company, with one vote on any matter presented to the shareholders.
| b. | Share option and RSU plans: |
The Company’s Board of Directors has approved equity incentive plans pursuant to which the Company is authorized to issue to employees, directors and officers of the Company and its subsidiaries (the “optionees”) options to purchase ordinary shares of the company, at an exercise price equal to at least the fair market value of the ordinary shares at the date of grant.
16
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 10:- | SHAREHOLDERS’ EQUITY (Cont.) |
The terms of option grants generally provide that 25% of total options are exercisable one year after the grant or vesting start date determined for each optionee and a further 6.25% is exercisable at the end of each subsequent three-month period over the following 3 years. Options are exercisable for up to 10 years from the grant date. Options that are cancelled or forfeited before expiration become available for future grants.
Under the company equity incentive plans, beginning in 2017, the Company
grants RSU’s, including performance based RSUs. The RSUs generally vest over a period of
As of June 30,
2022, an aggregate of
A summary of the Company’s share option activity and related information for the six months ended June 30, 2022 is as follows:
| Number of shares upon exercise | Weighted average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value | |||||||||||||
| Outstanding as of January 1, 2022 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding as of June 30, 2022 | $ | $ | ||||||||||||||
| Exercisable at end of period | $ | $ | ||||||||||||||
As of June 30, 2022, the Company had $
A summary of the Company’s RSU activity is as follows:
| Six months ended | ||||
| June 30, 2022 | ||||
| Unvested as of January 1, 2022 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Forfeited | ( | ) | ||
| Unvested as of June 30, 2022 | ||||
The weighted average fair value at
grant date of RSUs granted for the six months ended June 30, 2022 was $
The weighted average fair value of shares vested during the six months
ended June 30, 2022 was $
The weighted average fair value of
shares forfeited during the six months ended June 30, 2022 was $
17
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 10:- | SHAREHOLDERS’ EQUITY (Cont.) |
As of June 30, 2022, the Company had
$
The following table sets forth the total share-based compensation expense included in the consolidated statements of operations for the six months ended June 30, 2022 and 2021:
Six
months ended | ||||||||
| 2022 | 2021 | |||||||
| Cost of products | $ | $ | ||||||
| Cost of services | ||||||||
| Research and development | ||||||||
| Seles and marketing | ||||||||
| General and administrative | ||||||||
| Total share-based compensation expense | $ | $ | ||||||
On January 10, 2017, the Company signed a master purchase agreement
with Amazon Inc. (the “Agreement”) under which
On September 14, 2020, the Company
signed an amendment to the master purchase agreement (the “Amended Agreement”) with Amazon Inc. under which an additional
The Company recognized reductions to revenues of $
18
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 11:- | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of taxes:
| Unrealized gain (loss) on marketable securities | Unrealized gain (loss) on cash flow hedges | Foreign currency translation adjustment | Total | |||||||||||||
| Unaudited | ||||||||||||||||
| Six months ended June 30, 2022: | ||||||||||||||||
| Beginning balance | $ | ( | ) | $ | $ | $ | ||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | ||||||||||
| Amounts reclassified from accumulated other comprehensive income | ||||||||||||||||
| Net current period other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Ending Balance | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| NOTE 12:- | REVENUE RECOGNITION |
Revenue disaggregated by revenue source for the six months ended June 30, 2022 and 2021, consisted of the following:
Six
months ended | ||||||||
| 2022 | 2021 | |||||||
| Systems | $ | $ | ||||||
| Ink and consumables | ||||||||
| Services | ||||||||
| Service contracts and software subscriptions | ||||||||
| Total revenue | $ | $ | ||||||
19
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 12:- | REVENUE RECOGNITION (Cont.) |
The following table presents revenue disaggregated by geography based on customer location:
Six
months ended | ||||||||
| 2022 | 2021 | |||||||
| U.S | $ | $ | ||||||
| EMEA | ||||||||
| Asia Pacific | ||||||||
| Other | ||||||||
| Total revenue | $ | $ | ||||||
Performance obligations represent contracted revenues that have not yet been recognized, which include deferred revenues and non-cancelable contracts that will be invoiced and recognized as revenue in future periods. The Company elected to apply the optional exemption under paragraph 606-10-50-14(a) (of ASC Topic 606) not to disclose the remaining performance obligations that relate to contracts with an original expected duration of one year or less for which deferred revenues have not been recorded yet.
The following table represents the remaining performance obligations as of June 30, 2022, which are expected to be satisfied and recognized in future periods:
| Remainder of 2022 | 2023 | 2024 and thereafter | ||||||||||
| Services | ||||||||||||
Contract liabilities include amounts
received from customers for which revenue has not yet been recognized. Contract liabilities amounted to $
Provision for returns amounted to $
| NOTE 13:- | TAXES ON INCOME |
The main reconciling items between the theoretical and actual tax rate during the six months ended June 30, 2022, derived mainly from: tax expense related to the Company’s foreign subsidiaries income at different tax rates, deferred tax benefit recognized in Israel related to current losses at Preferred Enterprise reduced tax rates, and permanent differences.
20
KORNIT DIGITAL LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
| NOTE 14:- | BALANCES AND TRANSACTIONS WITH RELATED PARTIES |
The Company’s policy is to enter into transactions with related parties on terms that, on the whole, are no less favorable than those available from unaffiliated third parties. Based on the Company’s experience in the business sectors in which it operates and the terms of its transactions with unaffiliated third parties, the Company believes that all of the transactions described below met this policy at the time they occurred.
| 1. | Fritz Companies Israel T. Ltd. (“Fritz”) |
Fritz is a logistics company which is owned, in part, by the Chairman
of the Board since March 2018. The Company has an ongoing logistic contract with Fritz. During the six months ended June 30, 2022 and
2021, logistic service fees amounted to $
| 2. | Accord Insurance Agency Ltd. (“Accord”) |
The Company maintains a business relationship with Accord Insurance
Agency Ltd., or Accord, a company which is an insurance agency that is owned in part and controlled, by the Chairman of the Board. Accord
is the Company’s insurance agent for most of its insurance policies. During the six months ended June 30, 2022 and 2021, total premiums
under the contracts were $
| 3. | Priority Software Ltd. (“Priority”) |
Priority is the Company’s ERP solution provider, which is owned,
in part, by a few of the Company’s Board members. During the six months ended June 30, 2022 and 2021 maintenance fees and additional
licenses acquired amounted to $
| 4. | Tritone Technologies Ltd. (“Tritone”) |
On September 13, 2020, the Company entered into a sublease agreement
with Tritone Technologies Ltd., whose CEO is a director of the Company and one of whose shareholders is an equity fund controlled by the
chairman of the Board, for the sublease of 192 square meters in Rosh Ha’Ayin. The term of the lease is 24 months, until September
12, 2022, with an option to extend the term by an additional 12 months. The rent under the sublease is approximately $
| 5. | Magalcom Ltd. (“Magalcom”) |
The Company entered into a transaction with Magalcom which is owned,
in part and controlled, by the Chairman of the Board, for the replacement of communication equipment in its conference rooms. Total consideration
to be paid to Magalcom pursuant to this transaction is approximately $
- - - - - - - - - - - - -
21
Exhibit 99.2
KORNIT DIGITAL LTD.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
For the Six Months Ended June 30, 2022
Comparison of Period to Period Results of Operations
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Revenues | ||||||||
| Products | $ | 120,080 | $ | 130,122 | ||||
| Services | 21,349 | 17,667 | ||||||
| Total revenues | 141,429 | 147,789 | ||||||
| Cost of revenues | ||||||||
| Products | 64,904 | 62,429 | ||||||
| Services | 22,591 | 16,368 | ||||||
| Total cost of revenues | 87,495 | 78,797 | ||||||
| Gross profit | 53,934 | 68,992 | ||||||
| Operating expenses: | ||||||||
| Research and development, net | 28,091 | 19,243 | ||||||
| Sales and marketing | 37,631 | 24,879 | ||||||
| General and administrative | 20,016 | 15,689 | ||||||
| Total operating expenses | 85,738 | 59,811 | ||||||
| Operating income (loss) | (31,804 | ) | 9,181 | |||||
| Financial income, net | 6,123 | 2,416 | ||||||
| Income (loss) before taxes on income (tax benefit) | (25,681 | ) | 11,597 | |||||
| Taxes on income (tax benefit) | (1,008 | ) | 896 | |||||
| Net income (loss) | $ | (24,673 | ) | $ | 10,701 | |||
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| (as a % of revenues) | ||||||||
| Revenues | ||||||||
| Products | 84.9 | % | 88.0 | % | ||||
| Services | 15.1 | 12.0 | ||||||
| Total revenues | 100.0 | 100.0 | ||||||
| Cost of revenues | ||||||||
| Products | 45.9 | 42.2 | ||||||
| Services | 16.0 | 11.1 | ||||||
| Total cost of revenues | 61.9 | 53.3 | ||||||
| Gross profit | 38.1 | 46.7 | ||||||
| Operating expenses: | ||||||||
| Research and development, net | 19.9 | 13.0 | ||||||
| Sales and marketing | 26.6 | 16.9 | ||||||
| General and administrative | 14.1 | 10.6 | ||||||
| Total operating expenses | 60.62 | 40.5 | ||||||
| Operating income (loss) | (22.5 | ) | 6.2 | |||||
| Financial income, net | 4.3 | 1.6 | ||||||
| Income (loss) before taxes on income (tax benefit) | (18.2 | ) | 7.8 | |||||
| Taxes on income (tax benefit) | (0.7 | ) | 0.6 | |||||
| Net income (loss) | (17.5 | )% | 7.2 | % | ||||
Geographic Breakdown of Revenues
The following table sets forth the geographic breakdown of revenues from sales to customers located in the regions indicated below for the periods indicated:
| Six Months Ended June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| $ | % | $ | % | |||||||||||||
| ($ in thousands, except percentages) | ||||||||||||||||
| U.S | $ | 70,992 | 50.2 | % | $ | 98,310 | 66.5 | % | ||||||||
| EMEA | 48,583 | 34.4 | 33,526 | 22.7 | ||||||||||||
| Asia Pacific | 13,473 | 9.5 | 10,815 | 7.3 | ||||||||||||
| Other | 8,381 | 5.9 | 5,138 | 3.5 | ||||||||||||
| Total revenues | $ | 141,429 | 100.0 | % | $ | 147,789 | 100.0 | % | ||||||||
Comparison of the Six Months Ended June 30, 2022 and 2021
Revenues
Revenues of Kornit Digital Ltd. (“Kornit” “we,” “us” or “our”) decreased by $6.4 million, or 4.3%, to $141.4 million in the six months ended June 30, 2022, from $147.8 million in the six months ended June 30, 2021, which is net of $12.5 million and $9.7 million, in the fair value of warrants associated with revenues recognized from Amazon, respectively. Systems revenues decreased 12.4% to $78.2 million in the six months ended June 30, 2022 from $89.3 million in the six months ended June 30, 2021, as offset in part by a 20.3% increase in service revenues to $21.3 million in the six months ended June 30, 2022, from $17.7 million in the six months ended June 30, 2021, and an increase of 2.7% in ink revenues to $41.9 million from $40.8 million in six months ended June 30, 2022. The decrease in systems revenues for the six months ended June 30, 2022 reflected the impact of lower DTG systems revenues, mainly in the Americas region, due in part to an overall recalibration of e-commerce growth, macroeconomic headwinds, and delays in completion of customer production facilities.
Cost of Revenues and Gross Profit
Cost of revenues increased by $8.7 million, or 11.0%, to $87.5 million in the six months ended June 30, 2022, from $78.8 million in the six months ended June 30, 2021. Gross profit decreased by $15.1 million, or 21.8%, to $53.9 million in the six months ended June 30, 2022, from $69.0 million in the six months ended June 30, 2021. Gross margin decreased to 38.1% in the six months ended June 30, 2022, compared to 46.7% in the six months ended June 30, 2021, The year-over-year decrease in gross margin was driven by materially lower systems revenues, mainly in the Americas region. Inventory write-offs amounted to $2.5 million in the six months ended June 30, 2022, compared to $2.2 million in the six months ended June 30, 2021.
2
Operating Expenses
| Six Months Ended June 30, | ||||||||||||||||||||||||
| 2022 | 2021 | Change | ||||||||||||||||||||||
| Amount | % of Revenues | Amount | % of Revenues | Amount | % | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development, net | $ | 28,091 | 19.9 | % | $ | 19,243 | 13.0 | % | $ | 8,848 | 46.0 | % | ||||||||||||
| Sales and marketing | 37,631 | 26.6 | 24,879 | 16.9 | 12,752 | 51.3 | ||||||||||||||||||
| General and administrative | 20,016 | 14.1 | 15,689 | 10.6 | 4,327 | 27.6 | ||||||||||||||||||
| Total operating expenses | $ | 85,738 | 60.6 | % | $ | 59,811 | 40.5 | % | $ | 25,927 | 43.3 | % | ||||||||||||
Research and Development, net. Research and development net expenses increased by 46.0% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021. The increase was mainly attributable to $5.9 million in salaries and related personnel expenses and share-based compensation due to an increase in the number of employees. In addition, depreciation expenses increased by $1.2 million due to an increase in the number of our systems utilized for research and development activities, while expenses related to facilities increased by $1.5, which corresponded with the increase in the number of employees during the six month period ended June 30, 2022 relative to the corresponding period of 2021. As a percentage of total revenues, our research and development expenses increased from 13.0% in the six months ended June 30, 2021 to 19.9% in the six months ended June 30, 2022.
Sales and Marketing. Sales and marketing expenses increased by 51.4% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021. This increase was primarily due to $5.4 million in salaries and related personnel expenses and share-based compensation expenses due to a higher number of employees and an increase in variable compensation payout during the six months ended June 30, 2022 compared to the six months ended June 30, 2021. In addition, the increase reflected $5.2 million in marketing activities and $1.2 million in travel expenses (as COVID-19 travel restrictions were gradually lifted in the first half of 2022 relative to the first half of 2021). As a percentage of total revenues, our sales and marketing expenses increased during this period, from 16.9% in the six months ended June 30, 2021 to 26.6% in the six months ended June 30, 2022.
General and Administrative. General and administrative expenses increased by 27.6% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021. This primarily resulted from: (i) an increase of $2.7 million in salaries, related personnel expenses and share-based compensation expenses, mainly due to our employment of additional personnel during the first six months of 2022, as well (ii) an increase of $0.8 million in expenses related to consulting services, and (iii) an increase of $0.4 million in travel expenses (as COVID-19 travel restrictions were gradually lifted in the first half of 2022 relative to the first half of 2021). As a percentage of total revenues, our general and administrative expenses increased from 10.6% in the six months ended June 30, 2021 to 14.1% in the six months ended June 30, 2022.
3
Financial income, net
Finance income, net totaled $6.1 million in the six months ended June 30, 2022, compared to $2.4 million in the six months ended June 30, 2021. The $3.7 million increase in finance income in the first half of 2022 relative to the corresponding period in 2021, mainly resulted from $2.5 million related to interest on marketable securities and bank deposits and $1.0 million in currency exchange gains.
Taxes on Income
Our tax benefits amounted to $1.0 million, in the six months ended June 30, 2022, compared to tax expenses of $0.9 million in the six months ended June 30, 2021. The change from tax expenses to tax benefits was mainly derived from the increase of deferred tax assets related to carry-forward losses.
Liquidity and Capital Resources
As of June 30, 2022, we had approximately $196.6 million in cash and cash equivalents, $260.1 million in short term deposits and $247.9 million in short-term and long-term marketable securities, which, in the aggregate, totaled $704.6 million. We fund our operations mostly with cash raised via our equity financings, including our January 2017, June 2019, and September 2021 follow-on offerings, as well as income from operations (for periods when we realize operating income).
As of June 30, 2022, we had a line of credit with an Israeli bank for total borrowings of up to 6.0 million New Israeli Shekels. This line of credit is unsecured and available provided that (i) we maintain a 30% ratio of total tangible shareholders' equity to total tangible assets and (ii) the total credit use is less than 70% of our receivables. Interest rates on this credit line varied from (a) 0.3% to (b) Prime (Israel Interbank Offered Rate) plus 0.7% (2.95% as of June 30, 2022).
Based on our current business plans, we believe that our cash flows from operating activities (when our operations are cash-flow positive) and our existing cash resources will be sufficient to fund our projected cash requirements for at least the next 12 months without drawing on our lines of credit or using cash on hand. Our future capital requirements will depend on many factors, including our rate of revenue growth, the timing and extent of spending to support product development efforts, the expansion of our sales and marketing activities, and the timing of introductions of new solutions and the continuing market acceptance of our solutions as well as other business development efforts.
The following table presents the major components of net cash flows for the periods presented:
| Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Net cash provided by (used in) operating activities | $ | (54,640 | ) | $ | 10,330 | |||
| Net cash provided by (used in) investing activities | (359,958 | ) | (44,147 | ) | ||||
| Net cash provided by financing activities | (342 | ) | 608 | |||||
Net Cash Provided by (used in) Operating Activities
Six Months Ended June 30, 2022
Net cash used in operating activities in the six months ended June 30, 2022 was $54.6 million.
Net cash used in operating activities consisted of a net loss of $24.7 million, as adjusted in an amount of $30.2 million for non-cash line items, including stock-based compensation expenses, depreciation, amortization of intangible assets, fair value of warrants deducted from revenues, amortization of premium on marketable securities, offset in part, by other adjustments not included hereunder in an amount of $4.4 million.
4
During the six months ended June 30, 2022, our accounts receivable increased by $9.0 million, which reduced cash provided by operating activities. Number of days receivables for each of the six-month periods ended June 30, 2022 and 2021 was 77 days.
During the six months ended June 30, 2022, trade payable and deferred revenues and advances from customers decreased by $16.0 million, reducing cash provided by operating activities, inventory increased by $23.9 million, reflecting the decrease in business volume, and employee and payroll accruals decreased by $6.8 million decreasing cash provided by operating activities.
Six Months Ended June 30, 2021
Net cash provided by operating activities in the six months ended June 30, 2021 was $10.3 million.
Net cash provided by operating activities consisted of net income of $10.7 million, as adjusted in an amount of $18.3 million for non-cash line items, including stock-based compensation expenses, depreciation, amortization of intangible assets, fair value of warrants deducted from revenues, amortization of premium on marketable securities, offset, in part by other adjustments not included hereunder in an amount of $1.9 million.
During the six months ended June 30, 2021, our accounts receivable increased by $11.1 million, reflecting the increase in our revenues, which reduced cash provided by operating activities. Number of days receivables were outstanding for the for the six months ended June 30, 2021 decreased to 77 days, compared to 113 days for the six months ended June 30, 2020.
During the six months ended June 30, 2021, deferred revenues and advances from customers decreased by $11.4 million, reducing cash provided by operating activities, while other payables and accrued expenses increased by $5.7 million, reflecting the increase in business volume, increasing cash provided by operating activities.
Net Cash Used in Investing Activities
Six Months Ended June 30, 2022
Net cash used in investing activities was $360.0 million for the six months ended June 30, 2022, which was primarily attributable to an increase in bank deposits in an amount of $250.9 million, a net purchase of marketable securities in an amount of $84.5 million, cash paid in connection with acquisitions, net of cash acquired, in an amount of $14.6 million and an investment of $9.4 million in property and equipment.
Six Months Ended June 30, 2021
Net cash used in investing activities was $44.1 million for the six months ended June 30, 2021, which was primarily attributable to the net purchase of marketable securities and an increase in bank deposits in an amount of $38.5 million and an investment of $5.6 million in property and equipment.
Net Cash Provided by (Used in) Financing Activities
Six Months Ended June 30, 2022
Net cash used in financing activities was $0.3 million for the six months ended June 30, 2022, which was attributable to $682 thousand of payments related to shares withheld for taxes in connection with option exercises, offset in part by $340 thousand of proceeds from option exercises.
Six Months Ended June 30, 2021
Net cash provided by financing activities was $0.6 million for the six months ended June 30, 2021, which was attributable to approximately $1.8 million of proceeds from option exercises, offset in part by approximately $1.1 million of payments related to shares withheld for taxes in connection with option exercises.
5
Cautionary Statement Regarding Forward-Looking Statements
Certain information herein may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “may,” “will,” “could,” “should,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words.
These forward-looking statements may include, but are not limited to, statements regarding our future strategy, future operations, projected financial position, proposed products, estimated future revenues, projected costs, future prospects, the future of our industry and results that might be obtained by pursuing management’s current plans and objectives.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition and all statements (other than statements of historical facts) that address activities, events or developments that we expect, project, believe, anticipate, intend or project will or may occur in the future. The statements that we make regarding the following matters are forward-looking by their nature:
| ● | our plans to develop, introduce and sell new or improved products and product enhancements, including specifically our Atlas Max Poly, Presto Max and Apollo products, upgrades to Atlas systems to Atlas Max, and automation upgrades; | |
| ● | our expectations regarding the expansion of our serviceable addressable markets; | |
| ● | our expectations regarding our future gross margins and operating expenses; | |
| ● | our expectations regarding our growth and overall profitability; | |
| ● | our expectations concerning sales to, and revenues to be generated from, significant customers, including Amazon; | |
| ● | our expectations regarding the impact of variability on our future revenues; |
6
| ● | our expectations regarding drivers of our future growth, including anticipated sales growth, penetration of new markets, and expansion of our customer base; | |
| ● | our plans to continue our expansion into new product markets; | |
| ● | our plans regarding our distribution strategy for our products; | |
| ● | our goals with respect to the environmental impact of our operations and products; | |
| ● | our expectations concerning competition; | |
| ● | our expectations regarding the success of our new products and systems; | |
| ● | the expected impact of new accounting pronouncements on our results of operations; | |
| ● | the impact of government laws and regulations; | |
| ● | our expectations regarding our anticipated cash requirements for the next 12 months; | |
| ● | our plans to expand our international operations; | |
| ● | our plans to file and procure additional patents relating to our intellectual property rights and the adequate protection of these rights; | |
| ● | our plans to pursue strategic acquisitions or invest in complementary companies, products or technologies and our expectations as to the success of those acquisitions and investments; and | |
| ● | our expectations concerning our access to financing to support the expansion of our operations; and | |
| ● | the duration and severity of the adverse macro-economic trends triggered by the global COVID-19 pandemic, such as supply-chain delays inflationary pressures, and rising interest rates, which could potentially impact, in a material adverse manner, our operations, financial position and cash flows, and those of our customers and suppliers. |
The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions, and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the risks described in our Annual Report on Form 20-F for the year ended December 31, 2021, which is on file with the Securities and Exchange Commission (the ”SEC”), and the other risk factors discussed from time to time by us in reports filed or furnished to the SEC.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur.
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