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  "documentTitle": "Kornit Digital Ltd. (KRNT)",
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  "authorName": "Ben Axler",
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  "presentationDate": "2019-05-07 00:00:00",
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  "notes": "The slide uses a 'villain critique' style to highlight management's inconsistent messaging regarding their ability to forecast warrant impacts.",
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      "text": "Spruce Point is concerned that KRNT uses Monte Carlo simulation techniques to value the warrants, when in practice, most companies use the Black-Scholes method.",
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      "text": "And Again Claims Some Variables Cannot Be Modeled.. Care To Elaborate?",
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      "text": "KRNT Uses Non-Standard Valuation Method",
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      "text": "Starting In 2018, KRNT Claimed Not To Be Able To Forecast The Warrant Impact",
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      "text": "Spruce Point is concerned that KRNT uses Monte Carlo simulation techniques to value the warrants, when in practice, most companies use the Black-Scholes method. We believe this valuation method gives management broader latitude to value the warrants vs. the more variable-determinant Black Scholes method. Furthermore, in 2018 KRNT claimed that it could no longer give guidance on the impact of warrants to its revenues, despite using the Monte Carlo method, which would allow it to simulate key inputs driving the valuation. How does Kornit factor rebates to Amazon into its revenue model? Spruce Point is aware of many companies that provide stock option expense guidance while providing forecasts. Why can't Kornit forecast warrant expense?",
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      "text": "\"As a reminder, the calculation of warrants' fair value is based on combined effect of estimation of future revenues from Amazon, future Kornit share price in an unknown date, future stock volatility as well as other variables that currently cannot be predicted and some of which has no correlation to our business. As of today, we are not able to predict these variables. We assume the warrants impact at zero value for guidance purposes only.\"",
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      "text": "The Company utilizes a Monte Carlo simulation approach to estimate the fair value of the warrants, which requires inputs such as common ordinary share, the warrant exercise price, estimated ordinary share price volatility and risk-free interest rate, among others. The Company recognized a reduction to revenues of $2,030, $2,895 and $4,576 during the years ended December 31, 2016, 2017 and 2018, respectively.",
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      "text": "\"Moving to our guidance for the first quarter of 2018. We expect revenues to be in the range of $28 million to $31 million. We expect non-GAAP adjusted operating income to be in the range of minus 2% of revenues to 3% of revenues. These numbers assume no impact of deferred value of issued warrants in the first quarter of 2018. The calculation of warrants per value is based on the combined effect of estimation of future revenues from Amazon, future Kornit share price in an unknown date, Kornit future stock volatility as well as other variables that currently cannot be predicted. Since we are not able to predict these variables, we'll assume the warrants impact at 0 value for guidance purposes.\"",
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      "text": "Moving to our guidance for the first quarter of 2018. We expect revenues to be in the range of $28 million to $31 million. We expect non-GAAP adjusted operating income to be in the range of minus 2% of revenues to 3% of revenues. These numbers assume no impact of deferred value of issued warrants in the first quarter of 2018. The calculation of warrants per value is based on the combined effect of estimation of future revenues from Amazon, future Kornit share price in an unknown date, Kornit future stock volatility as well as other variables that currently cannot be predicted. Since we are not able to predict these variables, we'll assume the warrants impact at 0 value for guidance purposes. — CFO on Q4'17 Investor Call",
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