October 31, 2007

Stratasys Reports Record Third Quarter Financial Results

Dimension 3D Printer System Revenue Increases by 50%

MINNEAPOLIS--(BUSINESS WIRE)--Oct. 31, 2007--Stratasys, Inc. (Nasdaq:SSYS) today announced record third quarter results. The results and financial guidance have been adjusted to reflect the two-for-one stock split completed in August, 2007.

Revenues rose to $26.5 million for the third quarter ended September 30, 2007 over the $25.1 million reported for the same period in 2006. Revenue from proprietary products and services, which excludes all distributed products, increased by 26% in the third quarter over the same period last year. Total system shipments increased 36% to a record 521 units for the third quarter of 2007 compared with 383 units for the same period in 2006.

GAAP net income increased 26% to $3.2 million for the third quarter, or $0.15 per share, compared to net income of $2.6 million, or $0.12 per share, for the same period in 2006.

Non-GAAP net income increased 24% to $3.4 million for the third quarter, or $0.16 per share, compared to Non-GAAP net income of $2.8 million, or $0.14 per share, for the same period in 2006. Non-GAAP net income excludes the impact of stock-based compensation expense required under Financial Accounting Standard (SFAS) 123R. This expense, net of tax, amounted to approximately $203,000, or $0.01 per share, for the third quarter of fiscal 2007, and $227,000, or $0.01 per share, for the same period in 2006.

Revenues rose to $82.0 million for the nine months ended September 30, 2007 over the $74.1 million reported for the same period of the previous year. Revenue from proprietary products and services increased by 27% in the nine- month period over the same period last year. Total system shipments increased 24% to 1,633 units for the nine-month period of 2007 compared with 1,313 units for the same period in 2006.

GAAP net income increased 34% to $10.0 million for the nine-month period, or $0.47 per share, compared to net income of $7.5 million, or $0.36 per share, for the same period in 2006.

Non-GAAP net income increased 28% to $10.6 million for the nine-month period, or $0.49 per share, compared to Non-GAAP net income of $8.3 million, or $0.40 per share, for the same period in 2006. Non-GAAP net income excludes the impact of stock-based compensation expense required under SFAS 123R. This expense, net of tax, amounted to approximately $546,000, or $0.03 per share, for the nine-month period, and $763,000, or $0.04 per share, for the same period in 2006.

The reconciliation between non-GAAP and GAAP financial measures is provided in a table at the end of this press release.

"Our third quarter results reflect another strong contribution from our Dimension 3D printer business, as total 3D printer units and revenue grew by 44% and 50%, respectively," said Scott Crump, chairman and chief executive officer of Stratasys. "We continued to experience strong demand for our higher-priced 3D printers, but also generated strong growth for our lower-priced BST units into the educational channel.

"Our proprietary high-end system sales grew by 20% over the comparable quarter last year, driven in part by the successful launch earlier this year of the FDM 200mc and FDM 400mc. These two new products represented over 40% of our proprietary high-end systems sales during the quarter. The market's response to the 400mc, launched in August, was particularly favorable. We are pleased with these results, and remain confident that our new product initiatives and renewed focus on proprietary systems will generate positive results as we enter the fourth quarter, a traditionally strong period for high-end system sales.

"Proprietary consumables continued to grow steadily, increasing by 20% during the quarter. Incremental consumable sales from educational customers often lag system sales by several quarters. Given 3D printer sales have been particularly strong this year with educational customers, we believe the coming quarters could see a strengthening in consumable sales.

"We expect to maintain positive momentum in our high-end system business, with another new product introduction planned for later this year. At our global users' conference in September, direct digital manufacturing applications using our proprietary FDM technology were highlighted by several global companies. Our next FDM product should further strengthen our value proposition for these types of applications.

"We have shipped more than 2,000 units over the past twelve months, driven by a continuation of strong growth within our 3D printer business. We are planning for 4,000 units per year, with a longer-term vision of 13,000 units per year. We believe that achieving these unit volumes should translate into strong growth for our high-margin consumables.

"We completed our record third quarter with the highest quarter-ending backlog this year. Given that the third quarter is a traditionally weak period, we consider this to be an extraordinary accomplishment. In addition, over half of our backlog is comprised of systems that have been introduced in 2007.

"Given our strong backlog and positive outlook going into the fourth quarter, we remain confident in our financial guidance, and are looking forward to continued success in 2007," Crump concluded.

Stratasys provided the following information regarding its financial guidance for the fiscal year ending Dec. 31, 2007:

    --  Revenue guidance of $109 million to $112 million, versus
        previous guidance of $107 to $112 million.

    --  Non-GAAP earnings guidance of $0.70 to $0.75 per share, which
        excludes the impact of stock-based compensation required under
        SFAS 123R.

    --  GAAP earnings guidance of $0.66 to $0.71 per share.

The reconciliation between non-GAAP and GAAP financial guidance is provided in a table at the end of this press release.

The company will hold a conference call to discuss third quarter financial results on October 31, 2007 at 8:30 a.m. EDT. To access the call, dial 877-407-0782 (or 201-689-8567 internationally). A recording of the call will be available for two weeks. To access the recording, dial 877-660-6853 (or 201-612-7415 internationally) and enter account 286 and conference I.D. 259057.

A live webcast will be available through the Investors section of the Stratasys Web site (www.stratasys.com). A replay of the webcast will be made available on the Stratasys Web site for 90 days.

(Financial tables follow)

Stratasys Inc., Minneapolis, manufactures office-based rapid prototyping and manufacturing systems and 3D printers and offers rapid prototyping and manufacturing parts services. According to Wohlers Report 2007, Stratasys supplied 41 percent of all systems installed worldwide in 2006, making it the unit market leader, for the fifth consecutive year. Stratasys patented the rapid prototyping process known as fused deposition modeling (FDM). The process creates functional models and end-use parts directly from any 3D CAD program using ABS plastic, polycarbonate, PPSF, and blends. The company holds over 180 granted or pending rapid prototyping patents globally. Stratasys products are used in the aerospace, defense, automotive, medical, education, electronic, and consumer product industries. The company's systems are also used for direct digital manufacturing (DDM) and rapid tooling applications. For more information on the company, go to www.Stratasys.com; www.RedEyeRPM.com; or www.DimensionPrinting.com.

Forward Looking Statements

All statements herein that are not historical facts or that include such words as "expects", "anticipates", "projects", "estimates", "vision", "planning" or "believes" or similar words are forward-looking statements that we deem to be covered by and to qualify for the safe harbor protection covered by the Private Securities Litigation Reform Act of 1995. Our belief that we have the largest part-building service is based on the number of dedicated machines. Except for the historical information herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties; these include the continued market acceptance and growth of our Dimension line, FDM 200mc , FDM Maxum, FDM Vantage, Titan and FDM 400mc product lines; the size of the 3D printing market; our ability to penetrate the 3D printing market; our ability to maintain the growth rates experienced in this and preceding quarters; our ability to introduce and market new materials such as ABS-Plus and ABS-M30; and the market acceptance of this and other materials; the impact of competitive products and pricing; the timely development and acceptance of new products and materials; our ability to effectively and profitably market and distribute the Arcam product line; the success of our recent R&D initiative to expand the direct digital manufacturing capabilities of our core FDM technology; the success of our RedEyeRPM and other parts services; and the other risks detailed from time to time in our SEC Reports, including the annual report on Form 10-K for the year ended December 31, 2006 and our quarterly reports which will be filed on Form 10-Q throughout 2007.

Non-GAAP Discussion

The information discussed within this release includes financial results and forward-looking financial guidance that are in accordance with U.S. generally accepted accounting principles (GAAP). In addition, certain non-GAAP financial measures and guidance have been included that excludes certain expenses. The non-GAAP financial measures are provided in an effort to give information that investors may deem relevant to the company's operations and comparative performance; primarily the identification and exclusion of expenses associated with stock-based compensation required under SFAS 123R. In addition, the company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.

This release is also available on the Stratasys Web site at www.Stratasys.com.

STRATASYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

----------------------------------------------------------------------
                      Three Months Ended        Nine Months Ended
                         September 30,             September 30,
                   ------------------------- -------------------------
                       2007         2006         2007         2006
                   (unaudited)  (unaudited)  (unaudited)  (unaudited)
-------------------------------------------- -------------------------

Net Sales
  Product          $20,690,590  $19,781,371  $64,579,560  $59,002,516
  Services           5,772,882    5,367,792   17,452,266   15,069,027
                   ------------------------- -------------------------
                    26,463,472   25,149,163   82,031,826   74,071,543
                   ------------------------- -------------------------


Cost of goods
 sold
  Product            9,787,018   10,437,855   29,145,219   30,026,783
  Services           3,187,655    2,717,148    9,091,199    7,614,925
                   ------------------------- -------------------------
                    12,974,673   13,155,003   38,236,418   37,641,708
                   ------------------------- -------------------------

Gross profit        13,488,799   11,994,160   43,795,408   36,429,835
                   ------------------------- -------------------------

Costs and
 expenses
  Research and
   development       1,964,619    1,575,083    5,571,254    4,866,604
  Selling,
   general and
   administrative    7,435,325    6,878,793   24,667,240   21,065,946
                   ------------------------- -------------------------
                     9,399,944    8,453,876   30,238,494   25,932,550
                   ------------------------- -------------------------

Operating income     4,088,855    3,540,284   13,556,914   10,497,285
                   ------------------------- -------------------------

Other income
 (expense)
  Interest income      629,074      434,813    1,730,733    1,183,996
  Other               (103,901)     (85,098)    (311,188)    (266,688)
                   ------------------------- -------------------------
                       525,173      349,715    1,419,545      917,308
                   ------------------------- -------------------------

Income before
 income taxes        4,614,028    3,889,999   14,976,459   11,414,593

Income taxes         1,377,038    1,330,379    4,948,472    3,903,792
                   ------------------------- -------------------------

Net income         $ 3,236,990  $ 2,559,620  $10,027,987  $ 7,510,801
                   ========================= =========================

Earnings per
 common share
    Basic          $      0.15  $      0.13  $      0.48  $      0.37
                   ========================= =========================
    Diluted        $      0.15  $      0.12  $      0.47  $      0.36
                   ========================= =========================

Weighted average
 number of common
 shares
 outstanding
    Basic           20,939,735   20,213,704   20,693,597   20,261,440
                   ========================= =========================
    Diluted         21,813,829   20,573,084   21,519,903   20,703,806
                   ========================= =========================
STRATASYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

----------------------------------------------------------------------
                                           September 30, December 31,
                                               2007          2006
                                            (unaudited)
----------------------------------------------------------------------

ASSETS

Current assets
  Cash and cash equivalents                $ 19,216,040  $ 12,509,861
  Short-term investments                     24,000,609    21,367,316
  Accounts receivable, less allowance for
   returns and doubtful accounts of
   $1,136,321 in 2007 and $1,265,837 in
   2006                                      25,236,549   25,035,665
  Inventories                                13,122,741     9,925,217
  Net investment in sales-type leases         3,316,646     2,858,054
  Prepaid expenses                            2,791,626     3,368,586
  Deferred income taxes                         426,524       459,000
                                           ---------------------------
    Total current assets                     88,110,735    75,523,699
                                           ---------------------------

Property and equipment, net                  25,585,780    20,412,719
                                           ---------------------------

Other assets
  Intangible assets, net                      6,464,730     4,868,923
  Net investment in sales-type leases         3,399,018     3,271,015
  Deferred income taxes                         915,000       915,000
  Long-term investments                      13,255,307    10,747,689
  Other                                       2,477,272     2,265,200
                                           ---------------------------
    Total other assets                       26,511,327    22,067,827
                                           ---------------------------

                                           $140,207,842  $118,004,245
                                           ===========================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable and other current
   liabilities                             $ 10,988,255  $ 10,335,607
  Unearned revenues                          10,175,526     9,876,719
                                           ---------------------------
    Total current liabilities                21,163,781    20,212,326
                                           ---------------------------


Stockholders' equity
  Common stock, $.01 par value, authorized
   15,000,000 shares, issued 25,594,954
   shares in 2007 and 12,444,880 shares in
   2006                                         255,946       124,449
  Capital in excess of par value             86,638,260    75,726,716
  Retained earnings                          51,988,111    41,960,124
  Accumulated other comprehensive loss           64,119      (116,995)
  Less cost of treasury stock, 4,600,056
   shares in 2007 and 2,300,028 in 2006     (19,902,375)  (19,902,375)
                                           ---------------------------
    Total stockholders' equity              119,044,061    97,791,919
                                           ---------------------------

                                           $140,207,842  $118,004,245
                                           ===========================


STRATASYS, INC.

RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS

----------------------------------------------------------------------



                                    Three Months Ended September 30,
                                   -----------------------------------
                                      2007      Non-GAAP      2007
                                   (unaudited) Adjustments (unaudited)
                                   As Reported     (1)      Non-GAAP
----------------------------------------------------------------------


Selling, general and
 administrative                    $ 7,435,325  $(241,000) $ 7,194,325
                                   -----------------------------------

Total operating expenses             9,399,944   (241,000)   9,158,944

Operating income                     4,088,855    241,000    4,329,855
                                   -----------------------------------

Income before income taxes           4,614,028    241,000    4,855,028

 Income taxes                        1,377,038     38,124    1,415,162

 Net income                        $ 3,236,990  $ 202,876  $ 3,439,866

Earnings per common share
  Basic                            $      0.15  $    0.01  $      0.16
                                   ===================================
  Diluted                          $      0.15  $    0.01  $      0.16
                                   ===================================

Weighted average number of common
 shares outstanding
  Basic                             20,939,735              20,939,735
                                   ===================================
  Diluted                           21,813,829              21,813,829
                                   ===================================


                                     Nine Months Ended September 30,
                                   -----------------------------------
                                      2007      Non-GAAP      2007
                                   (unaudited) Adjustments (unaudited)
                                   As Reported     (1)      Non-GAAP
----------------------------------------------------------------------


Selling, general and
 administrative                    $24,667,240  $(723,000) $23,944,240
                                   -----------------------------------

Total operating expenses            30,238,494   (723,000)  29,515,494

Operating income                    13,556,914    723,000   14,279,914
                                   -----------------------------------

Income before income taxes          14,976,459    723,000   15,699,459

 Income taxes                        4,948,472    176,812    5,125,284

 Net income                        $10,027,987  $ 546,188  $10,574,175

Earnings per common share
  Basic                            $      0.48  $    0.03  $      0.51
                                   ===================================
  Diluted                          $      0.47  $    0.03  $      0.49
                                   ===================================

Weighted average number of common
 shares outstanding
  Basic                             20,693,597              20,693,597
                                   ===================================
  Diluted                           21,519,903              21,519,903
                                   ===================================



                                    Three Months Ended September 30,
                                   -----------------------------------
                                      2006      Non-GAAP      2006
                                   (unaudited) Adjustments (unaudited)
                                   As Reported     (1)      Non-GAAP
----------------------------------------------------------------------


Selling, general and
 administrative                    $ 6,878,793  $(284,282) $ 6,594,511
                                  ------------------------------------

Total operating expenses             8,453,876   (284,282)   8,169,594

Operating income                     3,540,284    284,282    3,824,566
                                  ------------------------------------

Income before income taxes           3,889,999    284,282    4,174,281

 Income taxes                        1,330,379     57,570    1,387,949

 Net income                        $ 2,559,620  $ 226,712  $ 2,786,332

Earnings per common share
  Basic                            $      0.13  $    0.01  $      0.14
                                  ====================================
  Diluted                          $      0.12  $    0.01  $      0.14
                                  ====================================

Weighted average number of common
 shares outstanding
  Basic                             20,213,704              20,213,704
                                  ====================================
  Diluted                           20,573,084              20,573,084
                                  ====================================


                                     Nine Months Ended September 30,
                                   -----------------------------------
                                      2006      Non-GAAP      2006
                                   (unaudited) Adjustments (unaudited)
                                   As Reported     (1)      Non-GAAP
----------------------------------------------------------------------


Selling, general and
 administrative                    $21,065,946  $(981,274) $20,084,672
                                  ------------------------------------

Total operating expenses            25,932,550   (981,274)  24,951,276

Operating income                    10,497,285    981,274   11,478,559
                                  ------------------------------------

Income before income taxes          11,414,593    981,274   12,395,867

 Income taxes                        3,903,792    217,835    4,121,627

 Net income                        $ 7,510,801  $ 763,439  $ 8,274,240

Earnings per common share
  Basic                            $      0.37  $    0.04  $      0.41
                                  ====================================
  Diluted                          $      0.36  $    0.04  $      0.40
                                  ====================================

Weighted average number of common
 shares outstanding
  Basic                             20,261,440              20,261,440
                                  ====================================
  Diluted                           20,703,806              20,703,806
                                  ====================================

(1) These adjustments reconcile the Company's GAAP results of operations to its non-GAAP results of operations. The Company believes that presentation of results excluding non-cash stock-based compensation provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company's GAAP results. The Company adopted the fair-value recognition provisions of SFAS No. 123 revised (123R) to expense stock-based compensation effective January 1, 2006 . Prior to the adoption of SFAS No. 123R, the Company accounted for employee stock-based compensation using the intrinsic value method prescribed by APB No. 25.

STRATASYS, INC.

FISCAL YEAR 2007
RECONCILIATION OF NON-GAAP FORWARD LOOKING GUIDANCE

                                      Earnings Per Diluted Share Range
----------------------------------------------------------------------

U.S. GAAP measure                              $0.66 to $0.71

Adjustments to exclude the effects of
 expenses related to stock-based
 compensation under SFAS 123R                   0.03 - 0.04

Non-GAAP estimates                             $0.70 to $0.75

CONTACT: Stratasys, Inc.
Shane Glenn, 952-294-3416
Director of Investor Relations
sglenn@stratasys.com

SOURCE: Stratasys, Inc.


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