Kornit digital a good buy/earnings

Investment Analysis Clubs Saul’s Investing Discussions
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with revenues of $66.1M (+152% Y/Y); and adj. net income of $7.7M compared to loss of $9.81M a year ago.

Adj. gross margin expanded by 1,403 bps to 47.1%; and adj. operating margin of 9.1%.

Net cash provided by operating activities for the quarter was $5.12M, compared to cash used $13.12M a year ago.

Company says strong first quarter results, were driven by a record quarter for mass production system shipments.

“The launch of our Max technology establishes a new standard for on-demand fashion and apparel production and significantly expands our addressable market into lucrative new segments. Our first product release, the ATLAS MAX, is just the beginning of revolutionary future new products coming from the MAX line, which will unlock additional huge market segments,” commented Ronen Samuel, CEO.

Amazon has invested heavily into this business. I think it’s a great buy. Let me know your opinions. Thanks

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I’ve owned this company in the past. I continue to like it but didn’t feel I had any visibility into competition or market size. At the end of the day, it’s a printer. And its end markets (clothing, home goods, textiles) are very competitive.

Q1 results were great. Q1 is usually their weakest quarter. If the rest of the year trends up, you’re looking at 40-50% YOY revenue growth. The question is if that is sustainable. 2020 results (especially Q1 and Q2) were hurt by COVID and provide easy comps. 2019/2020 revenue growth was 7.4%, and 2018/2019 revenue growth was just 26%. What’s the true growth rate here? Is it closer to 30% or 40%? Is that worth a 22 P/S?

A few additional notes:

  • These are big industrial machines ranging from $60,000 to $800,000, depending on the output and feature set. The smallest machine is roughly 9 ft x 6 ft and 3700 lbs, and the biggest machine 24 ft x 11 ft and 14,000 lbs.

  • This is razor and blade business. Kornit generates revenue from machine sales and recurring revenue from the consumables. The machines consume anywhere from $5,000 to $300,000 on average in ink and consumables per system. The company also offers maintenance services and extended warranty.

  • Amazon is a partner and shareholder. Amazon owns 4.75% of Kornit and also purchases products and services from Kornit (contract for $400M in Sept. 2020).

  • CEO is a former HP executive. Last year, the company debuted a solution for printing on polyester for leggings and athleisure. This year, the company rolled out a new high-density printing feature that simulates embroidery (3-D effect).

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