Stratasys Reports Third Quarter 2015 Financial Results

Stratasys reports $167.6 million in revenue for the third quarter

Third quarter non-GAAP net income of $0.7 million, or $0.01 per diluted share; and GAAP net loss of $938.0 million, or ($18.06) per basic share

Company provides financial guidance for fourth quarter of 2015

MINNEAPOLIS & REHOVOT, Israel–(BUSINESS WIRE)– Stratasys Ltd. (Nasdaq:SSYS), the 3D printing and additive manufacturing solutions company, today announced financial results for the third quarter of 2015.

Q3-2015 Financial Results Summary:

• Revenue for the third quarter of 2015 was $167.6 million, compared to $203.6 million for the same period last year;
• GAAP net loss for the third quarter was $938.0 million, or ($18.06) per basic share, compared to GAAP net loss of $31.3 million, or ($0.62) per basic share, for the same period last year.
• Non-GAAP net income for the third quarter was $0.7 million, or $0.01 per diluted share, compared to non-GAAP net income of $30.1 million, or $0.58 per diluted share, reported for the same period last year.
• The Company invested a net amount of $25.1 million in R&D projects (non-GAAP basis) during the third quarter, representing 15% of revenues.
• The Company used $17.9 million in cash for operations during the third quarter, and currently holds approximately $262.4 million in cash and cash equivalents, and short term bank deposits.
• Non-GAAP EBITDA for the third quarter amounted to a loss of $1.5 million.
• The Company sold 5,467 3D printing and additive manufacturing systems during the third quarter, and has sold a total of 141,395 systems worldwide as of September 30, 2015, on a pro forma combined basis.

The Company updated the goodwill impairment analysis of all of its reporting units. On the basis of its preliminary analysis, the Company recognized a non-cash goodwill and other intangible assets impairment expense of $910 million in the third quarter, primarily as a result of changes of the Company’s near-term cash flows projections which reflect, among other things, the increased uncertainty in the 3D printing environment. The impairment expense is subject to further adjustments pursuant to conclusion of the preliminary impairment test, which is expected to be completed within the next week and disclosed in the Company’s third quarter financial statements to be filed on Form 6-K. Finalization of the impairment analysis is expected to occur later in the fourth quarter.

“Our third quarter results are a reflection of the difficult global macro-economic environment we have observed throughout the year that is negatively impacting most of our product lines,” said David Reis, chief executive officer of Stratasys. “We believe the current environment is primarily a result of weak investment in capital equipment, which has combined with the negative impact of excess capacity that we believe was created during a period of extraordinary growth for Stratasys, and the overall industry, during 2013 and 2014. Additionally, although we believe that overall penetration in the prototyping market remains low, the segment has matured to an extent that our customers now have a wide selection of technology offerings to evaluate, resulting in lengthened sales cycles. Despite these near-term challenges, we continue to observe significant market potential, and remain confident in our long-term growth prospects.”

Business Highlights:

• Launched a new branding initiative which reinforces Stratasys’ status as the leader within the additive manufacturing and 3D printing market.
• Released an in-depth industry survey, conducted through Stratasys Direct Manufacturing, which supports the Company’s longer-term growth opportunities.
• Further developed Go-to-Market strategies that focus on providing specialized expertise and tailored 3D printing solutions, including expansion of the Vertical Solutions and Strategic Accounts Management programs.
• Progressed in the ongoing reorganization of MakerBot, which include organizational enhancements and initiatives designed to improve operational efficiencies.
• Announced plans to showcase the Stratasys additive manufacturing ecosystem at the Formnext 2015 exhibition in Frankfurt, Germany this November.

“We are focused on long-term objectives and remain confident we will overcome near-term challenges,” continued Reis. “We will respond to the current market environment by implementing adjustments to our costs and operating structure, while remaining committed to a plan that we believe will help unlock the significant potential within our industry for our innovative solutions. In addition to transforming our brand and go-to-market strategies, we are working on significant advancements for existing platforms, as well as the development of new capabilities and business models. We are positioning our Company for the future, and remain confident of the significant opportunity ahead.”

2015 Guidance:

The Company provided financial guidance for the fourth quarter of 2015 as follows:

• Total revenue in the range of $160 to $175 million, with non-GAAP net loss in the range of $9 to $3 million, or ($0.17) to ($0.06) per diluted share.
• GAAP net loss of $35.3 to $28.3 million, or ($0.68) to ($0.54) per basic share.
• Non-GAAP earnings guidance excludes $17 million of projected amortization of intangible assets; $7 to $7.5 million of share-based compensation expense; $2.5 million in non-recurring expenses related to acquisitions; $4 to $5 million in reorganization and other related costs; and includes $5.2 to $5.7 million in tax expenses related to non-GAAP adjustments.

The Company is reviewing its long term operating model, and will provide an update when visibility has improved.

For more than 25 years, Stratasys Ltd. (NASDAQ:SSYS) has been a defining force and dominant player in 3D printing and additive manufacturing – shaping the way things are made. Headquartered in Minneapolis, Minnesota and Rehovot, Israel, the Company empowers customers across a broad range of vertical markets by enabling new paradigms for design and manufacturing. The Company’s solutions provide customers with unmatched design freedom and manufacturing flexibility – reducing time-to-market and lowering development costs, while improving designs and communications. Stratasys subsidiaries include MakerBot and Solidscape and the Stratasys ecosystem includes 3D printers producing prototypes and parts; a wide range of 3D printing materials; parts on-demand via Stratasys Direct Manufacturing; strategic consulting and professional services; and Thingiverse/GrabCAD communities with 5+ million free design components, printable files. With approximately 3,000 employees and 800 granted or pending additive manufacturing patents, Stratasys has received more than 30 technology and leadership awards. Visit us online at: www.stratasys.com or http://blog.stratasys.com

Stratasys is a registered trademark of Stratasys Ltd. and/or its subsidiaries or affiliates.

Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are characterized by the use of forward-looking terminology such as “will,” “expects,” “anticipates,” “continues,” “believes,” “should,” “intended,” “projected,” “guidance,” “preliminary,” “future,” “planned,” “committed,” and other similar words. These forward-looking statements include, but are not limited to, statements relating to the Company’s objectives, plans and strategies, statements of preliminary or projected results of operations or of financial condition and all statements that address activities, events or developments that the Company intends, expects, projects, believes or anticipates will or may occur in the future. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. The Company has based these forward-looking statements on assumptions and assessments made by its management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things: the Company’s ability to efficiently and successfully integrate the operations of its acquired subsidiaries; the overall global economic environment; the impact of competition and new technologies; general market, political and economic conditions in the countries in which the Company operates; projected capital expenditures and liquidity; changes in the Company’s strategy; government regulations and approvals; changes in customers’ budgeting priorities; litigation and regulatory proceedings; further charges to non-cash goodwill and other intangible assets impairment expenses and those factors referred to under “Risk Factors”, “Information on the Company”, “Operating and Financial Review and Prospects”, and generally in the Company’s annual report on Form 20-F for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission (the “SEC”), and in other reports that the Company has filed with or furnished to the SEC from time to time. Readers are urged to carefully review and consider the various disclosures made in the Company’s SEC reports, which are designed to advise investors as to the risks and other factors that may affect its business, financial condition, results of operations and prospects. Any guidance and other forward-looking statements in this press release are made as of the date hereof, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Discussion Disclosure
The information provided within this press release includes financial results and projections that have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In addition, certain non-GAAP financial measures have been provided, which exclude certain charges, expenses and income. The non-GAAP measures should be read in conjunction with the corresponding GAAP measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance with GAAP. The non-GAAP financial measures have been included in an effort to provide information that investors may deem relevant to evaluate results from the Company’s core business operations and to compare the Company’s performance with prior periods. The non-GAAP financial measures primarily identify and exclude certain discrete items, such as merger-related expenses, amortization of intangible assets, impairment charges, reorganization and other related costs, one time write off of deferred tax assets, and expenses associated with share-based compensation required under ASC 718. The Company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.