KORNIT DEADLINE ALERT: Bragar – GuruFocus.com

Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, reminds investors that a class action lawsuit has been filed against Kornit Digital Ltd. (“Kornit” or the “Company”) (NASDAQ: KRNT) in the United States District Court for the District of New Jersey on behalf of all persons and entities who purchased or otherwise acquired Kornit securities between February 17, 2021 and July 5, 2022, both dates inclusive (the “Class Period”). Investors can apply to the Court until April 17, 2023 for appointment as the lead plaintiff in the case.

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This securities class action is brought on behalf of all persons or entities that purchased or otherwise acquired Kornit ordinary shares between February 17, 2021 and July 5, 2022, inclusive (the “Class Period”). The claims asserted herein are alleged against Kornit and certain of the Company’s current and former senior executives (collectively, “Defendants”), and arise under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5, promulgated thereunder.

Kornit is a company that designs and manufactures industrial printing technologies for the textile, apparel and garment industries. The Company’s digital inkjet printers enable end-users to print both direct-to-garment (“DTG”) and direct-to-fabric (“DTF”). DTG printing involves the direct printing of images and designs onto textiles, such as clothing or apparel. In DTF printing, large rolls of fabric pass through wide inkjet printers that print images and designs directly onto swaths of fabric that are then cut and sewn into a product, and can be used in the fashion and home décor industries. Kornit sells textile inks as well as other consumables to be used with its digital printers. Kornit offers customer assistance, equipment services, maintenance and repair for its printers through customer support contracts.

During the class period, the company began to offer software services, such as a complete suite of fulfillment and production solutions called KornitX. Through this, the company provides automated production systems, workflow management, and inventory management.

The Company’s largest customer is multinational e-commerce company, Amazon.com, Inc. (“Amazon”). Among the largest of Kornit’s other customers during the Class Period were Delta Apparel, Inc. (“Delta Apparel”), a leading provider of activewear and lifestyle apparel products, and Fanatics, Inc. (“Fanatics”), a global digital sports platform and leading provider of licensed sports merchandise. Kornit derives more than 60% its revenue from its top ten customers. Accordingly, it was critically important for Kornit to maintain those major customers as well as continue to grow its customer base in order to achieve the Company’s ambitious goal of “becoming a $1 billion revenue company in 2026.”

Throughout the Class Period, Kornit repeatedly touted the purported competitive advantages provided by its technology and assured investors that it faced virtually no meaningful competition in the “direct-to-garment” printing market. The Company claimed that its digital printing system, textile inks and consumables were highly demanded. It also offered services to customers for the maintenance and management of its digital printers and managing customer workflow. Kornit further assured investors that the purportedly strong demand for the Company’s products and services would enable it to maintain its existing customer base and attract new customers that would limit the risks associated with a substantial portion of its revenues being concentrated among a small number of large customers.

These statements, and many others throughout the class period, were false. In truth, Kornit and its senior executives knew, or at a minimum, recklessly disregarded, that the Company’s digital printing business was plagued by severe quality control problems and customer service deficiencies. Those problems and deficiencies caused Kornit to cede market share to competitors, which, in turn, led to a decrease in the Company’s revenue as customers went elsewhere for their digital printing needs. These misrepresentations caused Kornit’s ordinary shares to trade at artificially inflated prices during the Class Period.

Investors began to learn the truth on March 28, 2022, when Delta Apparel and Fanatics—two of Kornit’s major customers—announced that for months they had collaborated with one of Kornit’s principal competitors to develop a new digital printing technology that directly competed with products and services Kornit offered. Delta Apparel said that this new technology was already in place at four of its digital print facilities, and they had plans to extend it further. The utilization of this new, competing technology by Delta Apparel and Fanatics reflected the widespread dissatisfaction of Kornit’s major customers with the Company’s product quality and customer service, and meant that Kornit would likely lose revenue from two of its most important customers.

Kornit announced a net loss for the first quarter 2022 on May 11, 2022. This was despite exceeding expectations in terms of revenue. The Company also issued revenue guidance for the second quarter of 2022 that was significantly below analysts’ expectations. Kornit attributed its disappointing guidance to a slowdown in orders from the Company’s customers in the e-commerce segment. The Company also admitted that it knew for at least two previous quarters that one of its biggest customers, Delta Apparel had purchased digital printing systems from Kornit’s competitor. The price of Kornit shares fell by $33.3% or $18.78 as a result.

Kornit then announced on July 5, 2022 that the company would have a substantial revenue shortfall for the second half of 2022. Kornit’s revenue guidance for the second quarter was $56.4 million – $59.4million, which is far below the $85 million – $95 million range that it had provided in May 2022, less than two months before. Kornit attributed the substantial revenue miss to “a significantly slower pace of direct-to-garment (DTG) systems orders in the second quarter as compared to our prior expectations.” As a result of these disclosures, the price of Kornit ordinary shares declined by an additional $8.10 per share, or 25.7%.

As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s shares, Plaintiff and other Class members have suffered significant losses and damages.

You can contact Brandon Walker and Melissa Fortunato at [email protected], telephone at (212) 355-4648, or by filling+out+this+contact+form. No cost or obligation is imposed on you.

About Bragar Eagel & Squire, P.C.:

Bragar Eagel & Squire, P.C. The firm is nationally recognized and has offices in New York State, California, South Carolina, and elsewhere. The firm represents institutional and individual investors in commercial litigation, derivatives, securities, and other complex cases in state and federal court across the country. Please visit www.bespc.com to learn more about the firm. Attorney advertising Prior results do NOT guarantee similar outcomes.

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