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

Kornit to triple digital textile sales to Amazon

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.

The Covid-19 pandemic led to the country-wide lockdown on 25 March 2020. It will be two years tomorrow as I write this. What have we learned in this time? Maybe the meaning of resilience since small companies like us have had to rely on our resources and the forbearance of our employees as we have struggled to produce our trade platforms.

The print and packaging industries have been fortunate, although the commercial printing industry is still to recover. We have learned more about the digital transformation that affects commercial printing and packaging. Ultimately digital 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.

Web analytics show that we now have readership in North America and Europe amongst the 90 countries where our five platforms reach. Our traffic which more than doubled in 2020, has at times gone up by another 50% in 2021. And advertising which had fallen to pieces in 2020 and 2021, has started its return since January 2022.

As the economy approaches real growth with unevenness and shortages a given, we are looking forward to the PrintPack India exhibition in Greater Noida. We are again appointed to produce the Show Daily on all five days of the show from 26 to 30 May 2022.

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