Stratasys Ltd. (NASDAQ: SSYS), a global leader in additive technology solutions, announced financial results for the second quarter of 2018.

Q2 2018 Financial Results Summary:
Revenue for the second quarter of 2018 was $170.2 million, compared to $170.0 million for the same period last year.

  • GAAP gross margin was 49.1% for the quarter, flat compared to the same period last year.
  • Non-GAAP gross margin was 52.5% for the quarter, compared to 53.0% for the same period last year.
  • GAAP operating loss for the quarter was $1.9 million, compared to operating loss of $5.0 million for the same period last year.
  • Non-GAAP operating income for the quarter was $10.6 million, compared to operating income of $11.1 million for the same period last year.
  • GAAP net loss for the quarter was $3.6 million, or ($0.08) per diluted share, compared to a net loss of $6.0 million, or ($0.11) per diluted share, for the same period last year.
  • Non-GAAP net income for the quarter was $8.1 million, or $0.15 per diluted share, compared to Non-GAAP net income of $9.2 million, or $0.17 per diluted share, reported for the same period last year.
  • Net R&D expenses for the quarter amounted to $23.7 million, an increase of 1.9% compared to the same period last year.
  • The Company generated $13.0 million in cash from operations during the second quarter and ended the period with $346.7 million in cash and cash equivalents.

“Our second quarter revenue was in-line with our expectations for the period, as we saw recovery in high-end system orders in North America and in certain verticals, specifically our customers in government, aerospace, and automotive,” said Elchanan (Elan) Jaglom, Interim Chief Executive Officer of Stratasys. “We are pleased with the increased adoption we are seeing for our production-focused solutions, including our new F900 Aircraft Interiors Certification Solutions (AICS) 3D Printer and our J700 Dental 3D Printer, both of which address the unique needs of production applications in their respective verticals for aerospace and dental. We continued our positive trend of cash generation and operational discipline, while we also continue to ramp up our investments in our core FDM and PolyJet technologies, new metal additive manufacturing platform, advanced composite materials, and software and application development.”

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:

  • Revenue guidance of $670 to $700 million.
  • GAAP net loss of $41 to $25 million, or ($0.75) to ($0.46) per diluted share.
  • Non-GAAP net income of $16 to $27 million, or $0.30 to $0.50 per diluted share.
  • Non-GAAP operating margins of 4.5% to 6%.

Stratasys also updated the following guideline regarding the Company’s projected performance and strategic plans for 2018:

  • Capital expenditures are projected at $30 to $40 million, compared to previous projection of $40 to $50 million.

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 its 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 its 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. Q2 2018 Conference Call Details

The Company plans to hold a conference call to discuss its second quarter financial results on Wednesday, August 1, 2018 at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the Stratasys website at www.stratasys.com under the "Investors" tab; or directly at the following web address: https://edge.media-server.com/m6/p/2hp76z7i.

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 7497765.

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 website 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, and the Report on Form 6-K that attaches Stratasys’ unaudited, condensed consolidated financial statements as of, and for the quarter and six months ended, June 30, 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. 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)

   

June 30,

     December 31,
2018 2017
     
 
ASSETS
 
Current assets
Cash and cash equivalents $ 346,697 $ 328,761
Accounts receivable, net 123,466 132,671
Inventories 117,039 115,717
Net investment in sales-type leases 4,758 7,208
Prepaid expenses 7,036 7,696
Other current assets   24,332     22,858  
 
Total current assets   623,328     614,911  
 
Non-current assets
Net investment in sales-type leases - long term 2,627 4,439
Property, plant and equipment, net 195,944 199,951
Goodwill 386,746 387,108
Other intangible assets, net 125,039 142,122
Other non-current assets   34,694     31,219  
 
Total non-current assets   745,050     764,839  
 
Total assets $ 1,368,378   $ 1,379,750  
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 47,189 $ 39,849
Current portion of long term-debt 5,143 5,143
Accrued expenses and other current liabilities 33,586 30,041
Accrued compensation and related benefits 30,290 35,356
Deferred revenues   54,063     52,908  
 
Total current liabilities   170,271     163,297  
 
Non-current liabilities
Long-term debt 24,571 27,143
Deferred tax liabilities 2,995 7,069
Deferred revenues - long-term 15,098 15,200
Other non-current liabilities   29,953     32,899  
 
Total non-current liabilities   72,617     82,311  
 
Total liabilities   242,888     245,608  
 
Redeemable non-controlling interests 997 1,635
 
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 53,729 thousands shares and 53,631 thousands shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively

146 145
Additional paid-in capital 2,670,404 2,663,274
Accumulated other comprehensive loss (9,103 ) (7,023 )
Accumulated deficit   (1,536,954 )   (1,523,906 )
Equity attributable to Stratasys Ltd. 1,124,493 1,132,490
Non-controlling interest - 17
 
Total equity   1,124,493     1,132,507  
 
Total liabilities and equity $ 1,368,378   $ 1,379,750  
 
               
Stratasys Ltd.
 
Consolidated Statements of Operations
 
(in thousands, except per share data)                
 
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
(unaudited)     (unaudited) (unaudited)     (unaudited)
Net sales
Products $ 118,403 $ 121,021 $ 222,320 $ 236,108
Services   51,833     48,969   $ 101,749   $ 97,044  
170,236 169,990 324,069 333,152
 
Cost of sales
Products 53,262 54,723 98,480 109,203
Services   33,327     31,875     66,292     63,677  
86,589 86,598 164,772 172,880
       
Gross profit 83,647 83,392 159,297 160,272
 
Operating expenses
Research and development, net 23,689 23,251 48,799 47,885
Selling, general and administrative   61,887     65,186     118,892     130,061  
85,576 88,437 167,691 177,946
       
Operating loss (1,929 ) (5,045 ) (8,394 ) (17,674 )
 
Financial income (expense), net (83 ) 429 (75 ) 685
       
Loss before income taxes (2,012 ) (4,616 ) (8,469 ) (16,989 )
 
Income tax expenses 205 1,308 806 2,634
 
Share in losses of associated companies   (1,360 )   (229 )   (7,433 )   (517 )
 
Net loss (3,577 ) (6,153 ) (16,708 ) (20,140 )
 
Net loss attributable to non-controlling interests (26 ) (166 ) (116 ) (296 )
 
Net loss attributable to Stratasys Ltd. $ (3,551 ) $ (5,987 ) $ (16,592 ) $ (19,844 )
 
Net loss per ordinary share attributable to Stratasys Ltd.
Basic $ (0.08 ) $ (0.11 ) $ (0.33 ) $ (0.38 )
Diluted (0.08 ) (0.11 ) $ (0.33 ) $ (0.38 )
 
 
Basic 53,722 52,778 53,689 52,733
Diluted 53,722 52,778 53,689 52,733
 
                       
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
     
Three Months Ended June 30,
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) $ 83,647 $ 5,708 $ 89,355 $ 83,392 $ 6,784 $ 90,176
Operating income (loss) (1,2) (1,929 )

 

12,548 10,619 (5,045 ) 16,117 11,072

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

(3,551 )

 

11,643 8,092 (5,987 ) 15,165 9,178

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

$ (0.08 )

$

0.23 $ 0.15 $ (0.11 ) $ 0.28 $ 0.17
 
 
(1) Acquired intangible assets amortization expense 5,220 5,688
Non-cash stock-based compensation expense 442 799
Reorganization and other related costs 36 137
Merger and acquisition related expense   10     160  
5,708 6,784
 
(2) Acquired intangible assets amortization expense 2,539 2,588
Non-cash stock-based compensation expense 3,836 4,532
Change in fair value of obligations in connection with acquisitions - 617
Reorganization and other related costs 431 598
Merger and acquisition related expense   34     998  
  6,840     9,333  
  12,548     16,117  
 
 
(3) Corresponding tax effect (1,119 ) (1,150 )
Amortization of acquired intangibles assets related to equity method investments   214     198  
$ 11,643   $ 15,165  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

53,722 53,745 52,778 53,473
 
                       
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
     
Six Months Ended June 30,
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) $ 159,297 $ 11,307 $ 170,604 $ 160,272 $ 13,398 $ 173,670
Operating income (loss) (1,2) (8,394 )

23,935

15,541 (17,674 ) 32,775 15,101

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

(16,592 )

27,406

10,814 (19,844 ) 31,430 11,586

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

$ (0.33 )

$

0.53

$ 0.20 $ (0.38 ) $ 0.60 $ 0.22
 
 
(1) Acquired intangible assets amortization expense 10,424 11,393
Non-cash stock-based compensation expense 829 1,442
Reorganization and other related costs 54 231
Merger and acquisition related expense   -     332  
11,307 13,398
 
(2) Acquired intangible assets amortization expense 5,097 5,132
Non-cash stock-based compensation expense 6,864 7,793
Change in fair value of obligations in connection with acquisitions - 1,313
Reorganization and other related costs 2,102 2,284
Gain from sale of plant and property (1,563 ) -
Merger and acquisition related expense   128     2,855  
  12,628     19,377  
  23,935     32,775  
 
 
(3) Corresponding tax effect (1,911 ) (1,735 )
Amortization of acquired intangibles assets related to equity method investments   5,382     390  
$ 27,406   $ 31,430  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

53,689 53,732 52,733 53,406
 
 
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