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Stratasys Releases First Quarter 2018 Financial Results

First Quarter Revenue decreased 6% to $153.8 million compared to same period last year

First Quarter GAAP net loss of $13.0 million, or ($0.24) per diluted share, and non-GAAP net income of $2.7 million, or $0.05 per diluted share

Generated $27.1 million of cash from operations during the quarter

MINNEAPOLIS & REHOVOT, Israel — (BUSINESS WIRE) — May 2, 2018Stratasys Ltd. (NASDAQ: SSYS), a global leader in additive technology solutions, announced financial results for the first quarter of 2018.

Q1 2018 Financial Results Summary:
Revenue for the first quarter of 2018 was $153.8 million, compared to $163.2 million for the same period last year.

“We are disappointed with our revenue for the first quarter, which is primarily attributed to underperformance in North America related to high end system orders, specifically from customers in government and other key verticals such as aerospace and automotive,” said Ilan Levin, Chief Executive Officer of Stratasys. “We do not believe that our first quarter revenue represents a fundamental change in the demand environment in the North American market. We continue to maintain a strong pipeline of opportunities, and are not modifying the full year guidance we issued earlier this year. Despite our revenue results in the period we continued our positive trend of operational discipline and cash generation. We remain committed to our investments in long-term initiatives that include advancements in our core FDM and PolyJet technologies, new metal additive manufacturing platform, advanced composite materials, and software and application development.”

New Product Announcements
At the RAPID + TCT 3D Printing and Additive Manufacturing Conference, the Company showcased multiple product announcements reaffirming leadership in prototyping and manufacturing.

Extending the capabilities and broadening the Company’s product line for the prototyping market:

New materials offerings, certification solutions, and software capabilities for the manufacturing market:

The Company provided further details regarding its new metal additive manufacturing platform:

New Partnership and Customer Announcements
A growing number of companies are moving through the adoption cycle of additive manufacturing technologies as they transition from early adoption to certification and qualification, and then onto final production applications. Recent examples include:

“We are encouraged by the growing number of companies that are making significant progress in pursuing certifications for specific high value applications,” continued Levin. “Our recent collaborations deepen these efforts as our customers move towards production applications, designing and manufacturing with confidence.”

Financial Guidance:
Stratasys today reiterated the following information regarding the company’s guidance for projected revenue and net income for the fiscal year ending December 31, 2018:

Stratasys reiterated the following additional guidelines regarding the company’s projected performance and strategic plans for 2018:

The Company’s guidance reflects increased investments in R&D, tools, materials, and additional resources aimed at expanding addressable markets by accelerating development efforts for the new metal additive manufacturing platform, further advancements based on our FDM and PolyJet technologies, and specific go-to-market initiatives in order to deepen customer engagement.

Given the expected ongoing negative impact of not recording a tax benefit on U.S. tax losses on the Company’s non-GAAP net income, the Company believes that the rate of growth in its non-GAAP operating income will be the best measure of performance.

Non-GAAP earnings guidance excludes $32 to $34 million of projected amortization of intangible assets; $17 to $19 million of share-based compensation expense; and $7 to $9 million in reorganization and other related costs; and includes $4 to $5 million in tax expenses related to non-GAAP adjustments.

Stratasys Ltd. Q1 2018 Conference Call Details

The Company plans to hold the conference call to discuss its first quarter financial results on Wednesday, May 2, 2018 at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the Stratasys Web site at www.stratasys.com under the "Investors" tab; or directly at the following web address: https://edge.media-server.com/m6/p/6zpd5mm6.

To participate by telephone, the domestic dial-in number is (866) 394-5776 and the international dial-in is (409) 350-3596. The access code is 2128479.

Investors are advised to dial into the call at least ten minutes prior to the call to register. The webcast will be available for 90 days on the "Investors" page of the Stratasys Web site or by accessing the provided web address.

Stratasys (NASDAQ: SSYS) is a global leader in additive technology solutions for industries including Aerospace, Automotive, Healthcare, Consumer Products and Education. For nearly 30 years, a deep and ongoing focus on customers’ business requirements has fueled purposeful innovations—1,200 granted and pending additive technology patents to date—that create new value across product lifecycle processes, from design prototypes to manufacturing tools and final production parts. The Stratasys 3D printing ecosystem of solutions and expertise—advanced materials; software with voxel level control; precise, repeatable and reliable FDM and PolyJet 3D printers; application-based expert services; on-demand parts and industry-defining partnerships—works to ensure seamless integration into each customer’s evolving workflow. Fulfilling the real-world potential of additive, Stratasys delivers breakthrough industry-specific applications that accelerate business processes, optimize value chains and drive business performance improvements for thousands of future-ready leaders around the world.

Corporate Headquarters: Minneapolis, Minnesota and Rehovot, Israel.
Online at: www.stratasys.com, http://blog.stratasys.com and LinkedIn.

Stratasys and Fortus are registered trademarks and the Stratasys signet is a trademark of Stratasys Ltd. and/or its subsidiaries or affiliates. All other trademarks are the property of their respective owners.

Cautionary Statement Regarding Forward-Looking Statements

The statements in this press release regarding Stratasys' strategy, and the statements regarding its projected future financial performance, including the financial guidance concerning its expected results for 2018, are forward-looking statements reflecting management's current expectations and beliefs. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt change. Due to risks and uncertainties associated with Stratasys' business, actual results could differ materially from those projected or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: the degree of market acceptance of our 3D printers, high-performance systems and consumables, and the software and technology included in those systems; potential declines in the demand for, or the prices of, our products and services, or volume of our sales, due to decreased demand either for them specifically or in the 3D printing market generally; potential further charges against earnings that we could be required to take due to impairment of additional goodwill or other intangible assets; potential shifts in our product mix to lower-margin products or in our revenues mix towards our AM services business; any failure to adequately adapt our infrastructure and properly integrate the internal and external sources of our growth to generate intended benefits (including from the companies that we recently acquired); the impact of competition and new technologies; risks related to our relationships with our suppliers, resellers and independent sales agents, and our operations at our manufacturing sites; risks related to the international scope of our operations and regulatory compliance (including reporting, environmental, anti-corruption and other regulatory compliance) related to that scope of operations; risks related to the security of our information systems (including risks related to potential cyber-attacks); changes in the overall global economic environment or in political and economic conditions in the countries in which we operate; changes in our strategy; costs and potential liability relating to litigation and regulatory proceedings; and those additional factors referred to in Item 3.D “Key Information - Risk Factors”, Item 4, “Information on the Company”, Item 5, “Operating and Financial Review and Prospects,” and all other parts of our Annual Report on Form 20-F for the year ended December 31, 2017 (the “2017 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 28th, 2018. Readers are urged to carefully review and consider the various disclosures made throughout our 2017 Annual Report, the Report on Form 6-K that attaches Stratasys’ unaudited, condensed consolidated financial statements as of, and for the quarter ended, March 31, 2018, and its review of its results of operations and financial condition for those periods, which has been furnished to the SEC on or about the date hereof, and our other reports filed with or furnished to the SEC, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Any guidance provided, and other forward-looking statements made, in this press release are made as of the date hereof, and Stratasys 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.

Use of non-GAAP financial measures

The non-GAAP data included herein, which excludes certain items as described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures are useful information for investors and shareholders of our Company in gauging our results of operations (x) on an ongoing basis after excluding merger and acquisition related expense and reorganization-related charges or gains, and (y) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets, changes in fair value of obligations in connection with acquisitions and the corresponding tax effect of those items. We also exclude, when applicable, non-recurring significant tax charges or benefits that relate to prior periods which we do not believe are reflective of ongoing business and operating results. These non-GAAP adjustments either do not reflect actual cash outlays that impact our liquidity and our financial condition or have a non-recurring impact on the statement of operations, as assessed by management. These non-GAAP financial measures are presented to permit investors to more fully understand how management assesses our performance for internal planning and forecasting purposes. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all items indicated above during a period, which may not provide a comparable view of our performance to other companies in our industry. Investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with GAAP. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table below.

       
Stratasys Ltd.
 
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)            
March 31, December 31,
2018 2017
       
 
ASSETS
 
Current assets
Cash and cash equivalents $ 346,531 $ 328,761
Accounts receivable, net 119,844 132,671
Inventories 120,065 115,717
Net investment in sales-type leases 5,980 7,208
Prepaid expenses 8,261 7,696
Other current assets   19,295     22,858  
 
Total current assets   619,976     614,911  
 
Non-current assets
Net investment in sales-type leases - long term 3,423 4,439
Property, plant and equipment, net 197,554 199,951
Goodwill 387,416 387,108
Other intangible assets, net 132,811 142,122
Other non-current assets   34,475     31,219  
 
Total non-current assets   755,679     764,839  
 
Total assets $ 1,375,655   $ 1,379,750  
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 40,608 $ 39,849
Current portion of long term-debt 5,143 5,143
Accrued expenses and other current liabilities 33,390 30,041
Accrued compensation and related benefits 35,541 35,356
Deferred revenues   55,061     52,908  
 
Total current liabilities   169,743     163,297  
 
Non-current liabilities
Long-term debt 25,857 27,143
Deferred tax liabilities 4,141 7,069
Deferred revenues - long-term 15,139 15,200
Other non-current liabilities   30,785     32,899  
 
Total non-current liabilities   75,922     82,311  
 
Total liabilities   245,665     245,608  
 
Redeemable non-controlling interests 1,579 1,635
 
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 53,710 thousands shares and 53,631 thousands shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively

145 145
Additional paid-in capital 2,667,023 2,663,274
Accumulated other comprehensive loss (5,337 ) (7,023 )
Accumulated deficit   (1,533,403 )   (1,523,906 )
Equity attributable to Stratasys Ltd. 1,128,428 1,132,490
Non-controlling interest (17 ) 17
 
Total equity   1,128,411     1,132,507  
 
Total liabilities and equity $ 1,375,655   $ 1,379,750  
 
       
Stratasys Ltd.
 
Consolidated Statements of Operations
 
(in thousands, except per share data)            
 
Three Months Ended March 31,
2018 2017
(unaudited)     (unaudited)
Net sales
Products $ 103,917 $ 115,087
Services   49,916     48,075  
153,833 163,162
 
Cost of sales
Products 45,218 54,480
Services   32,965     31,802  
78,183 86,282
   
Gross profit 75,650 76,880
 
Operating expenses
Research and development, net 25,110 24,634
Selling, general and administrative   57,005     64,875  
82,115 89,509
   
Operating loss (6,465 ) (12,629 )
 
Financial income, net 8 256
   
Loss before income taxes (6,457 ) (12,373 )
 
Income tax expenses 601 1,326
 
Share in losses of associated companies   (6,073 )   (288 )
 
Net loss (13,131 ) (13,987 )
 
Net loss attributable to non-controlling interests (90 ) (130 )
 
Net loss attributable to Stratasys Ltd. $ (13,041 ) $ (13,857 )
 
Net loss per ordinary share attributable to Stratasys Ltd.
Basic $ (0.24 ) $ (0.26 )
Diluted (0.24 ) (0.26 )
 
 
Basic 53,657 52,690
Diluted 53,657 52,690
 
                       
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
     
Three Months Ended March 31,
2018 Non-GAAP 2018 2017 Non-GAAP 2017
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
U.S. dollars and shares in thousands (except per share amounts)
 
Gross profit (1) $ 75,650 $ 5,599 $ 81,249 $ 76,880 $ 6,614 $ 83,494
Operating income (loss) (1,2)

$

(6,465 ) $ 11,387

$

4,922

$

(12,629 )

$

16,658

$

4,029

Net income (loss) attributable to Stratasys Ltd. (1,2,3)

$

(13,041 ) $ 15,763

$

2,722

$

(13,857 )

$

16,265

$

2,408

Net income (loss) per diluted share attributable to Stratasys Ltd. (4)

$ (0.24 )

$

0.29 $ 0.05 $ (0.26 ) $ 0.31 $ 0.05
 
 
(1) Acquired intangible assets amortization expense 5,204 5,705
Non-cash stock-based compensation expense 387 643
Reorganization and other related costs 18 94
Merger and acquisition related expense   (10 )   172  
5,599 6,614
 
(2) Acquired intangible assets amortization expense 2,558 2,544
Non-cash stock-based compensation expense 3,028 3,261
Change in fair value of obligations in connection with acquisitions - 696
Reorganization and other related costs 1,671 1,686
Gain from sale of plant and property (1,563 ) -
Merger and acquisition related expense   94     1,857  
  5,788     10,044  
  11,387     16,658  
 
 
(3) Corresponding tax effect (792 ) (585 )
Amortization of acquired intangibles assets related to equity method investments   5,168     192  
$ 15,763   $ 16,265  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

53,657 53,721 52,690 53,341
 
 
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
 
Fiscal Year 2018
 
(in millions, except per share data)
   
 
GAAP net loss ($41) to ($25)
 

Adjustments

Stock-based compensation expense $17 to $19
Intangible assets amortization expense $32 to $34
Reorganization and other related costs $7 to $9
Tax expense related to Non-GAAP adjustments ($4) to ($5)
 
Non-GAAP net income $16 to $27
 
GAAP loss per share ($0.75) to ($0.46)
 
Non-GAAP diluted earnings per share $0.30 to $0.50
 



Contact:

Stratasys Investor Relations
Yonah Lloyd
Vice President - Investor Relations
Email Contact