Amazon to buy US$ 400 million Kornit product over five years

Kornit to triple digital textile sales to Amazon

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Kornit Digital's award winning textile printer Photo Kornit
Kornit Digital's award winning textile printer Photo Kornit

Last month, Kornit signed a deal with Amazon to triple sales of its direct-to-garment printers to the eCommerce and technology giant. At the same time, Kornit conducted its fourth share offering in the past two and a half years.

Kornit issued two million new shares worth US$ 124 million while a unit of Amazon, which owns 4.75% of Kornit, sold 1.6 million of its shares for another US$ 100 million in the share offering. Amazon acquired its shares in Kornit from 2017 onwards for US$ 13.33 a share, in a vesting agreement tied to payments made by Amazon for the purchase of goods and services from Kornit Digital since May 2016.

Amazon has signed a new agreement, an expanded version of the one it has had with Kornit since January 2017 – Kornit will issue warrants entitling Amazon to 3.1 million shares or 8% of its issued share capital diluted. The warrants will be exercisable at US$ 59.26 per share compared with the closing price of US$ 62.74 on the Nasdaq on 14 September 2020.

Amazon has committed to buying products and services from Kornit totaling US$ 400 million over the next five years – US$ 250 million in existing products such as digital printers, inks, and services in exchange for warrants convertible into 1.9 million shares, and US$ 150 million in future products in exchange for warrants for 1.5 million shares. The warrants will be allocated in tranches each time Amazon buys products or services worth US$ 5 million.

Amazon has used Kornit products for providing its Merch by Amazon service, enabling designers to sell customized garments and personalized T-shirts. Amazon handles production, shipping, and collection. Now Amazon wants to expand its digital printing to other home furnishings, upholstery, bedspreads, and sports equipment for which it plans to use the new Kornit’s Presto printer.

Ronen Samuel, the CEO of Kornit Digital, indicated that the agreement marks a turning point for Kornit making it a huge company. And that the sales target of US$ 500 million in 2023 will be achieved only through organic growth. Kornit’s digital printers are utilized to print for the top ten brands in apparel and fashion.

Kornit customer, investor, shareholder

The biggest user of its printers is Amazon, which accounted for 8.5% of sales in the second quarter of this year. Digital printing experts say that Amazon only executes those businesses in-house that are profitable while outsourcing the lower margin products and services to third party suppliers. The exploding demand for personalized fabrics and garments bodes well for the digital textile and direct-to-garment printers.

The new deal with Kornit in which Amazon is an investor is also an impressive financial and business arrangement. When Amazon buys Kornit printers and inks, it gets warrants that can be turned into shares at a fixed price. While Kornit can periodically leverage cash from issuing new shares as it grows, simultaneously, Amazon can also sell some of its shares profitably to finance its expansion.

2023 promises an interesting ride for print in India

Indian Printer and Publisher founded in 1979 is the oldest B2B trade publication in the multi-platform and multi-channel IPPGroup. While the print and packaging industries have been resilient in the past 33 months since the pandemic lockdown of 25 March 2020, the commercial printing and newspaper industries have yet to recover their pre-Covid trajectory.

The fragmented commercial printing industry faces substantial challenges as does the newspaper industry. While digital short-run printing and the signage industry seem to be recovering a bit faster, ultimately their growth will also be moderated by the progress of the overall economy. On the other hand book printing exports are doing well but they too face several supply-chain and logistics challenges.

The price of publication papers including newsprint has been high in the past year while availability is diminished by several mills shutting down their publication paper and newsprint machines in the past four years. Indian paper mills are also exporting many types of paper and have raised prices for Indian printers. To some extent, this has helped in the recovery of the digital printing industry with its on-demand short-run and low-wastage paradigm.

Ultimately digital print and other digital channels will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future. For instance, there is no alternative to a rise in textbook consumption but this segment will only reach normality in the next financial year beginning on 1 April 2023.

Thus while the new normal is a moving target and many commercial printers look to diversification, we believe that our target audiences may shift and change. Like them, we will also have to adapt with agility to keep up with their business and technical information needs.

Our 2023 media kit is ready, and it is the right time to take stock and reconnect with your potential markets and customers. Print is the glue for the growth of liberal education, new industry, and an emerging economy. We seek your participation in what promises to be an interesting ride.

– Naresh Khanna

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