February 17, 2010

Stratasys Reports Fourth Quarter and Full Year Financial Results

Q4 Cash Flow from Operations Exceeds $11 MillionCompany Begins 2010 With Record System Backlog

MINNEAPOLIS, Feb 17, 2010 (BUSINESS WIRE) -- Stratasys, Inc. (Nasdaq:SSYS) today announced fourth quarter and full year financial results.

Revenue was $26.2 million for the fourth quarter ended December 31, 2009 as compared with $31.9 million reported for the same period in 2008. System shipments totaled 431 units for the fourth quarter of 2009, as compared with 570 for the same period last year.

Net income was $2.4 million for the fourth quarter, or $0.12 per share, compared to net income of $2.0 million, or $0.10 per share, for the same period last year.

Non-GAAP net income, which excludes certain discrete items and stock-based compensation expense, was $2.9 million, or $0.14 per share, for the fourth quarter of 2009 compared to $3.2 million, or $0.16 per share, for the same period last year.

Revenue was $98.4 million for the twelve-month period ended December 31, 2009 versus $124.5 million reported for the same period in 2008. System shipments totaled 1,918 units for the twelve-month period of 2009, versus 2,184 for the same period last year.

Net income was $4.1 million for the twelve-month period of 2009, or $0.20 per share, compared to net income of $13.6 million, or $0.65 per share, for the same period last year.

Non-GAAP net income, which excludes certain discrete items and stock-based compensation expense, was $5.7 million, or $0.28 per share, for the twelve-month period ended December 31, 2009 compared to $16.0 million, or $0.76 per share, for the same period last year.

Cash flow from operations totaled $11.3 million and $25.5 million for the fourth quarter and twelve-month periods in 2009, respectively. The company had $70.9 million in cash and investments as of the end of December 2009.

Appropriate reconciliations between GAAP and non-GAAP financial measures are provided in a table at the end of this press release. The table provides itemized detail of impairment charges, restructuring expenses, as well as the stock-based compensation expenses used to determine non-GAAP financial measures.

"We are pleased with our fourth quarter performance considering the difficult economic environment," said Scott Crump, chairman and chief executive officer of Stratasys. "We observed an improvement in business conditions during the quarter as customers have become more confident in an economic recovery and willing to increase spending. System orders in December were notably strong, leading to a record system backlog of $6.3 million.

"Our margins for the fourth quarter improved over the same quarter last year and sequentially, driven by the relatively strong sales of our high-margin consumables. The growth in consumables during the quarter was significant, given that it represents the first positive sales growth for consumables in twelve months. Our margins also benefited from the cost-saving measures we implemented in early 2009, and our successful initiative to lower the manufacturing cost of our uPrint 3D printers.

"Cash flow continues to be exceptionally strong as we generated over $11 million and over $25 million in cash from operations during the fourth quarter and full year, respectively. This was a significant accomplishment considering the difficult year, but is also a credit to the hard work of our finance and operations teams in better managing our working capital. Our total cash and investment position increased to $71 million as of the end of 2009 as compared with $48 million at the end of 2008.

"We finished 2009 encouraged by the positive trends within our markets and emboldened by our new strategic initiatives - we believe that we are well-positioned coming out of the recession. We believe the growth trend in consumables combined with our record year-end backlog suggest a building of positive momentum. Our indirect distribution model for Fortus systems in North America is beginning to generate positive results, and despite the difficult operating environment in 2009, our margins expanded in the fourth quarter and we strengthened our financial position.

"Throughout 2009 we communicated our goal of significantly expanding our distribution footprint within 3D printing. In a major strategic step to meet that goal, we recently announced a game-changing agreement with HP for the worldwide distribution of Stratasys developed and manufactured 3D printers. We believe the agreement represents a major inflection point in advancing our 3D printing strategy worldwide. In addition, we believe HP's decision is confirmation that a significant market opportunity exists among the millions of designers that are using 3D CAD today.

"HP's proven track record in our market as the established sales leader for 2D design plotters makes them an ideal candidate for collaboration within 3D printing. We can now leverage our industry-leading FDM technology with HP's brand awareness and extensive sales and marketing organization. HP will begin the rollout of an HP-brand 3D printer later this year, and we are on track to begin shipment of those products in the coming months. We believe this agreement will ultimately allow us to realize the full sales potential within 3D printing.

"In evaluating our industry, HP concluded that the Stratasys FDM technology represented the best platform for their 3D printing products. A perfect example of FDM's capabilities was recently showcased by Autodesk, the world's leader in design software, at their annual user conference in December. During the conference, Autodesk unveiled a full-scale turbo-prop aircraft engine model, designed in Autodesk's Inventor software, and produced entirely by using Stratasys FDM technology.

"FDM is the core technology that drives all our products, including our Fortus line of 3D production systems. The highly durable and accurate production-grade plastic part output of our Fortus line provides an ideal solution for a broad range of applications, including direct digital manufacturing (DDM), or the production of finished parts. We are excited that our collaboration with an unnamed Fortune 500 company to develop products targeting DDM applications will be continuing in 2010.

"Although business trends are encouraging as we begin 2010, we will continue to conservatively manage our resources given the difficulty in predicting market conditions over the near-term. However, the economy aside, we believe the current long-term opportunities available to us are the most exciting in our company's history and we look forward to successfully executing our plan over the coming months," Crump concluded.

The company plans to hold a conference call to discuss its fourth quarter financial results on Wednesday, February 17, 2010 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: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=61402&eventID=2718530.

To participate by telephone, the domestic dial-in number is 800-299-0433 and the international dial-in is 617-801-9712. The access code is 22588899. 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 at the provided web address.

The company recently produced a video that provides an overview of the turbo-prop displayed by Autodesk (Nasdaq:ADSK) at their annual user conference in December. That video can be accessed at the following web address: http://www.youtube.com/watch?v=ALA2Gp59_IM&feature=related.

Stratasys, Inc., Minneapolis, manufactures additive fabrication machines for prototyping and manufacturing plastic parts. The company also operates a service for part prototyping and production. According to Wohlers Report 2009, Stratasys supplied 43 percent of all additive fabrication systems installed worldwide in 2008, making it the unit market leader for the seventh consecutive year. Stratasys patented and owns the process known as FDM.® The process creates functional prototypes and end-use parts directly from any 3D CAD program, using high-performance industrial thermoplastics. The company holds more than 285 granted or pending additive fabrication patents globally. Stratasys products are used in the aerospace, defense, automotive, medical, business and industrial equipment, education, architecture, and consumer-product industries. Online at: www.Stratasys.com.

Forward Looking Statements

All statements herein that are not historical facts or that include such words as "expects," "anticipates," "projects," "estimates," "vision," "could," "potential," "planning" or "believes" or similar words constitute forward-looking statements covered by the safe harbor protection of the Private Securities Litigation Reform Act of 1995.Except for the historical information herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties.These include statements regarding projected revenue and income in future quarters; the size of the 3D printing market; our objectives for the marketing and sale of our Dimension® and uPrint 3D Printers and our FortusTM 3D Production Systems, particularly for use in direct digital manufacturing (DDM); the demand for our proprietary consumables; the expansion of our paid parts service; and our beliefs with respect to the growth in the demand for our products.Other risks and uncertainties that may affect our business include our ability to penetrate the 3D printing market; the success of our distribution agreement with HP; our ability to achieve the growth rates experienced in preceding quarters; our ability to introduce, produce and market new materials, such as ABSplus and ABS-M30, and the market acceptance of these and other materials; the impact of competitive products and pricing; our timely development of new products and materials and market acceptance of those products and materials; the success of our recent R&D initiative to expand the DDM capabilities of our core FDM technology and our distribution agreement with HP; and the success of our RedEyeOnDemandTMand other paid parts services.Actual results may differ from those expressed or implied in our forward-looking statements. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements, but we expressly disclaim any obligation to do so, even if our beliefs and expectations change. In addition to the statements described above, such forward-looking statements are subject to the risks and uncertainties described more fully in our reports filed or to be filed with the Securities and Exchange Commission, including our annual reports on Form 10-K and quarterly reports on Form 10-Q.

Financial Tables & Non-GAAP Discussion

The information discussed within this release includes financial results that are in accordance with accounting principles generally accepted in the United States (GAAP).Certain prior year balance sheet amounts shown in the financial tables have been reclassified to conform to the current year's presentation.In addition, certain non-GAAP financial measures have been provided that exclude certain charges and expenses.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 are provided 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 an impairment charge for certain auction rate securities, restructuring expenses, and expenses associated with stock-based compensation required under ASC 718.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 December 31,       Twelve Months Ended December 31,
      2009   2008         2009     2008
      (unaudited)   (unaudited)       (unaudited)    
                       
Net sales                    
Product   $ 20,012,834     $ 25,050,071         $ 73,210,550     $ 98,969,152  


Services
    6,220,923       6,892,902          

25,145,682
      25,525,859  
        26,233,757       31,942,973           98,356,232       124,495,011  
                       
Cost of sales                    
Product    

10,042,286
      13,160,364           40,925,443       47,672,443  
Services     2,821,727       2,856,974           11,047,217       10,410,249  
        12,864,013       16,017,338          

51,972,660
      58,082,692  
                       
Gross profit     13,369,744       15,925,635           46,383,572       66,412,319  
                       
Operating expenses                    
Research and development     2,226,740       2,131,381           7,737,125       8,973,203  
Selling, general and administrative     7,565,589       9,837,854           32,822,727      

36,842,665
 
        9,792,329       11,969,235           40,559,852       45,815,868  
                       
Operating income     3,577,415       3,956,400           5,823,720      

20,596,451
 
                       
Other income (expense)                    
Interest income, net     235,227      

390,527
          989,922       2,037,257  
Foreign currency transaction losses, net     (63,619 )     (535,142 )         (232,767 )     (834,762 )
Other     (415,383 )     (778,868 )         (398,603 )     (1,065,459 )
        (243,775 )     (923,483 )         358,552       137,036  
                       
Income before income taxes     3,333,640       3,032,917           6,182,272       20,733,487  
                       
Income taxes     941,810       1,021,623           2,066,001      

7,118,000
 
                       
Net income   $ 2,391,830     $ 2,011,294         $ 4,116,271     $ 13,615,487  
                       
Earnings per common share                    
Basic   $ 0.12     $ 0.10         $ 0.20     $ 0.66  


Diluted
  $ 0.12     $ 0.10         $ 0.20    

$
0.65  
                       

Weighted average number of common shares outstanding

                   
Basic     20,268,299       20,221,071           20,235,747       20,676,436  
Diluted    

20,372,274
      20,250,483           20,267,999       21,079,265  
                                       
STRATASYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
      December 31,   December 31,
      2009   2008
      (unaudited)    
           
ASSETS        
           
Current assets        
Cash and cash equivalents  

$
48,315,926     $ 27,945,799  
Short-term investments - held to maturity     16,073,718       4,835,055  

Accounts receivable, less allowance for doubtful
accounts of $903,101 at December 31, 2009
and $1,017,521 at December 31, 2008



    19,249,813       26,539,733  
Inventories     14,608,014       19,889,351  

Net investment in sales-type leases, less allowance
for doubtful accounts of $222,011 at December 31, 2009
and $324,642 at December 31, 2008



    3,618,876       3,870,472  
Prepaid expenses and other current assets     2,247,612       2,608,080  
Deferred income taxes    

2,277,000
      2,168,000  
Total current assets     106,390,959       87,856,490  
           
Property and equipment, net     26,326,012      

29,749,921
 
           
Other assets        
Intangible assets, net    

7,653,269
      8,347,200  
Net investment in sales-type leases     3,477,039       4,545,977  


Deferred income taxes
    688,000       -  
Long-term investments - available for sale     1,055,750       1,109,250  
Long-term investments - held to maturity    

5,467,318
      13,825,981  
Other non-current assets     2,078,165       2,308,214  


Total other assets
    20,419,541       30,136,622  
           
Total assets  

$
153,136,512     $ 147,743,033  
           
LIABILITIES AND STOCKHOLDERS' EQUITY        
           
Current liabilities        
Accounts payable and other current liabilities   $

12,874,798
    $ 11,795,238  
Unearned revenues    

10,678,427
      12,765,396  
Total current liabilities     23,553,225       24,560,634  
           
Non-current liabilities          
Deferred tax liabilities     -      

620,000
 
Total non-current liabilities     -       620,000  
           
Total liabilities     23,553,225       25,180,634  
           
Commitments and contingencies        
           
Stockholders' equity        

Common stock, $.01 par value, authorized 30,000,000 shares;
26,053,318 and 25,909,603 issued as of 2009 and 2008, respectively

    260,533      

259,096
 
Capital in excess of par value     94,329,398       91,611,078  
Retained earnings     74,015,940       69,899,669  
Accumulated other comprehensive loss     (18,159 )     (203,019 )
Less cost of treasury stock, 5,687,631 shares in 2009 and 2008     (39,004,425 )     (39,004,425 )
Total stockholders' equity     129,583,287       122,562,399  
           
Total liabilities and stockholders' equity   $ 153,136,512     $ 147,743,033  
                 
STRATASYS, INC.
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
      Non-GAAP Adjustments for the Three Months Ended December 31, 2009     Non-GAAP Adjustments for the Three Months Ended December 31, 2008    
      Consolidated           Consolidated     Consolidated               Consolidated    
      (unaudited)   Stock-Based   Investment   (unaudited)     (unaudited)   Stock-Based   Investment   Sales and Marketing   (unaudited)    
      As Reported   Compensation (1)(2)   Impairments (3)(5)   Non-GAAP     As Reported   Compensation (1)   Impairments (5)   Reorganization (6)   Non-GAAP    
                                             
                                             
Selling, general and administrative expenses  

$
7,565,589     $ (229,896 )   $ -   $ 7,335,693       $ 9,837,854     $ (360,682 )   $ -   $ (545,417 )   $ 8,931,755      
                                             
Total operating expenses     9,792,329       (229,896 )     -     9,562,433         11,969,235       (360,682 )     -     (545,417

)
    11,063,136      
                                             
Operating income     3,577,415       229,896       -     3,807,311        

3,956,400
      360,682       -     545,417       4,862,499      
                                             
Other income (loss)     (415,383 )     -       444,000     28,617        

(778,868
)     -       830,750    

-
      51,882      
Total other income     (243,775 )     -       444,000     200,225         (923,483 )     -       830,750     -      

(92,733
)    
                                             
Income before income taxes     3,333,640       229,896       444,000    

4,007,536
        3,032,917       360,682      

830,750
    545,417       4,769,766      
Income taxes       941,810       (13,052 )     148,296     1,077,054         1,021,623       20,000       319,000     188,169       1,548,792      
                                             
Net income     $ 2,391,830     $ 242,948     $ 295,704   $ 2,930,482       $

2,011,294
    $ 340,682     $ 511,750  

$
357,248     $ 3,220,974      
                                             
Earnings per common share                                          
Basic     $ 0.12     $ 0.01     $ 0.01   $ 0.14       $ 0.10     $ 0.02     $ 0.03   $ 0.02    

$
0.16      
Diluted     $ 0.12     $ 0.01     $ 0.01   $ 0.14       $

0.10
    $ 0.02     $ 0.03  

$
0.02     $ 0.16      
                                             

Weighted average number of common shares outstanding



                                         
Basic       20,268,299               20,268,299         20,221,071                   20,221,071      
Diluted       20,372,274               20,372,274         20,250,483                   20,250,483      
                                             
                                             
                                             
                                             
      Non-GAAP Adjustments for the Twelve Months Ended December 31, 2009   Non-GAAP Adjustments for the Twelve Months Ended December 31, 2008
      Consolidated             Consolidated   Consolidated                   Consolidated
      (unaudited)   Stock-Based   Investment     (unaudited)   (unaudited)   Stock-Based   Investment   Sales and Marketing   Workforce   (unaudited)
      As Reported   Compensation (1)(2)   Impairments (3)(5)   Restructuring (4) Non-GAAP   As Reported   Compensation (1)   Impairments (5)   Reorganization (6)   Reductions (7)   Non-GAAP
                                             
                                             

Selling, general and administrative expenses



  $ 32,822,727     $ (900,855 )   $ -   $ (778,840 ) $

31,143,032
  $ 36,842,665     $ (1,317,185 )   $ -   $ (545,417 )   $ (181,416 )   $ 34,798,647
                                             
Total operating expenses     40,559,852       (900,855 )     -     (778,840

)
  38,880,157     45,815,868       (1,317,185 )     -     (545,417

)
    (181,416 )     43,771,850
                                             
Operating income     5,823,720       900,855       -     778,840     7,503,415     20,596,451       1,317,185       -     545,417       181,416       22,640,469
                                             
Other income (loss)     (398,603 )     -      

444,000
    -    

45,397
    (1,065,459 )     -      

1,270,750
    -       -       205,291
Total other income     358,552       -       444,000     -     802,552     137,036      

-
      1,270,750     -       -       1,407,786
                                             
Income before income taxes     6,182,272       900,855       444,000     778,840     8,305,967     20,733,487       1,317,185       1,270,750     545,417       181,416       24,048,255
Income taxes       2,066,001       88,948       148,296     266,907     2,570,152     7,118,000       209,218       488,000     188,169      

62,589
      8,065,976
                                             
Net income     $ 4,116,271     $ 811,907     $ 295,704   $ 511,933   $ 5,735,815   $ 13,615,487     $ 1,107,967     $ 782,750  

$
357,248     $ 118,827     $ 15,982,279
                                             
Earnings per common share                                          
Basic     $ 0.20     $ 0.04     $ 0.01   $ 0.03   $ 0.28   $ 0.66     $ 0.05     $ 0.04  

$
0.02     $ 0.01     $ 0.77
Diluted     $ 0.20     $ 0.04     $ 0.01  

$
0.03   $

0.28
  $ 0.65     $ 0.05    

$
0.04   $

0.02
    $ 0.01     $ 0.76
                                             

Weighted average number of common shares outstanding



                                         
Basic       20,235,747                 20,235,747     20,676,436                       20,676,436
Diluted      

20,267,999
                20,267,999     21,079,265                       21,079,265
                                                         

These adjustments reconcile the Company's GAAP results of operations to its non-GAAP results of operations. The Company believes that presentation of results adjusted for the non-GAAP items described below provides meaningful supplemental information to both management and investors.

 

(1) - Represents non-cash stock-based compensation expense.

(2) - Income taxes for stock-based compensation expense included a favorable impact from incentive stock options exercised during the fourth quarter of 2009.



(3) - Represents a $350,000 reduction in the assessed fair value of an equity investment that the Company considered to be other than temporary.

(4) - Represents severance and other related costs associated with the Company's restructuring in the first quarter of 2009.

(5) - Represents a reduction in the assessed fair value of an auction rate security investment that the Company considered to be other than temporary.

(6) - Represents reorganization costs associated with the Company's North American sales and marketing operations.



(7) - Represents severance and other related employee costs associated with the Company's workforce reduction in the third quarter of 2008.

                                                         

The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a 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, however these measures should not be viewed as a substitute for the Company's GAAP results.

SOURCE: Stratasys, Inc.

Stratasys, Inc.
Shane Glenn, 952-294-3416
Director of Investor Relations
shane.glenn@stratasys.com

 


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