July 28, 2010

Stratasys Reports Second Quarter Financial Results

Company Achieves Record Consumable Revenue and System Shipments

MINNEAPOLIS, Jul 28, 2010 (BUSINESS WIRE) -- Stratasys, Inc. (NASDAQ:SSYS) today announced second quarter financial results.

The company reported revenue of $30.1 million for the second quarter ended June 30, 2010, a 22% increase over the $24.6 million reported for the same period in 2009. System shipments totaled a record 682 units for the second quarter of 2010, compared to the 442 shipped during the same period last year.

The company reported net income of $2.3 million for the second quarter, or $0.11 per share, compared to a net income of $850,000, or $0.04 per share, for the same period last year.

Non-GAAP net income, which excludes stock-based compensation expense, was $2.6 million, or $0.12 per share, for the second quarter of 2010 compared to $1.0 million, or $0.05 per share, for the same period last year.

Revenue was $53.1 million for the six-month period ended June 30, 2010, compared to $47.8 million reported for the same period in 2009. System shipments totaled a record 1,291 units for the six-month period, a 25% increase over the 1,033 shipped during the same period last year.

The six-month period in 2010 included a $5.0 million one-time non-cash charge against revenue. The charge against revenue represents the fair value of a warrant issued to HP (NYSE: HPQ) for 500,000 shares of Stratasys, Inc. common stock, in connection with the distribution agreement signed in January 2010.

Non-GAAP revenue for the six-month period, which excludes the warrant charge, was $58.1 million, a 22% increase over the $47.8 million reported for the same period in 2009.



Net income was $1.9 million for the six-month period, or $0.09 per share, compared to net income of $146,000, or $0.01 per share for the same period last year.

Non-GAAP net income, which excludes the warrant charge, certain discrete items and stock-based compensation expense, was $5.5 million, or $0.26 per share, for the six-month period of 2010 compared to $1.0 million, or $0.05 per share, for the same period last year.

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 the non-GAAP financial measures.

"Our strong second quarter results reflect a continuation of the positive trends we observed last quarter, as our core markets are responding favorably to the economic recovery," said Scott Crump, chairman and chief executive officer of Stratasys. "The second quarter generated record levels of consumable revenue and system unit sales, which increased by 25% and 54% over last year, respectively. In addition, our 3D printer system revenue grew by 56%, and was driven by strong sales of our Stratasys-brand products, as well at the new HP Designjet line.

"We are pleased with the progress of our game-changing collaboration with HP, as they began shipping the new Designjet 3D printer line to customers across five European countries during the second quarter. HP's orders for the Designjet line exceeded their original forecast during the second quarter, driven by strong sales to end-users.

"While sales to HP during this phase of the agreement remain relatively small as expected, we are seeing the early signs of success, and are cautiously optimistic about the implications for expanding the collaboration in 2011. We are currently preparing for the next phase of the agreement, which includes planning for an expansion in our capacity, as well as a dramatic evolution in our product line.

"In a separate agreement, we are pleased to announce that we formally extended our collaboration with an unnamed Fortune 500 partner to develop new platforms for DDM applications. The contract extension includes additional funds to further develop our line of Fortus 3D production systems. We are excited that this industry-leading company shares our vision and recognizes the potential of our FDM technology for manufacturing end-use parts.

"We are encouraged by the positive trends in our business during the second quarter, and we enter the third quarter with a strong system pipeline. We are optimistic about the early successes of our OEM agreement with HP and about the potential expansion of this relationship in 2011. In addition, incremental growth opportunities continue to develop within our Fortus line of 3D production systems. We believe our future remains bright," Crump concluded.

The company plans to hold a conference call to discuss its second quarter financial results on Wednesday, July 28, 2010 at 8:30 a.m. (ET). The investor conference call will be available via live webcast on the Stratasys Web site at http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.stratasys.com&esheet=6375872&lan=en-US&anchor=www.stratasys.com&index=1&md5=15b56773e188920e9e215c30a3ff1067 under the "Investors" tab; or directly at the following web address: http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fphx.corporate-ir.net%2Fplayerlink.zhtml%3Fc%3D61402%26s%3Dwm%26e%3D3223468&esheet=6375872&lan=en-US&anchor=http%3A%2F%2Fphx.corporate-ir.net%2Fplayerlink.zhtml%3Fc%3D61402%26s%3Dwm%26e%3D3223468&index=2&md5=20df70727791884e2b5a50c59eff7802.



To participate by telephone, the domestic dial-in number is 800-299-7089 and the international dial-in is 617-801-9714. The access code is 75582905. 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.

(Financial tables follow)

Stratasys, Inc., Minneapolis, manufactures additive manufacturing machines for prototyping and manufacturing plastic parts. The company also operates a service for part prototyping and production. According to Wohlers Report 2010, Stratasys supplied more additive fabrication systems than any other competitor in 2009, making it the unit market leader for the eighth 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: http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.Stratasys.com&esheet=6375872&lan=en-US&anchor=www.Stratasys.com&index=3&md5=2bc170435da39675f936169e2e54e727.



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; our WaveWash support removal system; 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 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).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 the warrant charge, 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 http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.stratasys.com&esheet=6375872&lan=en-US&anchor=www.Stratasys.com&index=4&md5=f49c7dbd77985c314f6991301b469f85.



                           
STRATASYS, INC.
                           
CONSOLIDATED STATEMENTS OF OPERATIONS
                           
                           
      Three Months Ended June 30,       Six Months Ended June 30,
        2010         2009           2010         2009  
      (unaudited)     (unaudited)       (unaudited)     (unaudited)
                           
Net sales                        
Product   $ 23,797,952       $ 18,200,029         $ 45,559,570       $ 35,151,531  
Services     6,261,544         6,448,248           12,494,051         12,641,547  
Fair value of warrant related to OEM agreement     -         -           (4,987,806 )       -  
        30,059,496         24,648,277           53,065,815         47,793,078  
                           
Cost of sales                        
Product     12,432,146         10,278,739           23,110,163         20,964,894  
Services     2,865,346         2,796,317           5,773,572         5,682,610  
        15,297,492         13,075,056           28,883,735         26,647,504  
                           
Gross profit     14,762,004         11,573,221           24,182,080         21,145,574  
                           
Operating expenses                        
Research and development     2,550,833         1,655,206           4,949,331         3,526,965  
Selling, general and administrative     8,198,063         8,467,618           15,981,782         17,775,827  
        10,748,896         10,122,824           20,931,113         21,302,792  
                           
Operating income (loss)     4,013,108         1,450,397           3,250,967         (157,218 )
                           
Other income (expense)                        
Interest income, net     163,690         237,913           378,890         524,266  
Foreign currency transaction losses, net     (438,551 )       (399,819 )         (797,806 )       (163,218 )
Other     (24,225 )       12,078           (5,985 )       25,803  
        (299,086 )       (149,828 )         (424,901 )       386,851  
                           
Income before income taxes     3,714,022         1,300,569           2,826,066         229,633  
                           
Income taxes     1,381,867         450,998           937,010         83,990  
                           
Net income   $ 2,332,155       $ 849,571         $ 1,889,056       $ 145,643  
                           
Earnings per common share                        
Basic   $ 0.11       $ 0.04         $ 0.09       $ 0.01  
Diluted   $ 0.11       $ 0.04         $ 0.09       $ 0.01  
                           

Weighted average number of common shares outstanding

                       
Basic     20,527,571         20,223,139           20,485,059         20,221,995  
Diluted     21,070,029         20,242,197           21,047,241         20,236,245  
                         
STRATASYS, INC. AND SUBSIDIARIES
               
CONSOLIDATED BALANCE SHEETS
               
               
      June 30,       December 31,
      2010       2009
      (unaudited)        
               
ASSETS            
               
Current assets            
Cash and cash equivalents   $ 12,244,607         $ 48,315,926  
Short-term investments - held to maturity     19,705,233           16,073,718  

Accounts receivable, less allowance for returns and doubtful accounts of $1,409,750 at June 30, 2010 and $903,101 at December 31, 2009

    21,740,568           19,249,813  
Inventories     17,333,073           14,608,014  


Net investment in sales-type leases, less allowance for doubtful accounts of $126,393 at June 30, 2010 and $222,011 at December 31, 2009

    3,745,024           3,618,876  
Prepaid expenses and other current assets     2,338,178           2,247,612  
Deferred income taxes     2,277,000           2,277,000  
Total current assets     79,383,683           106,390,959  
               
Property and equipment, net     26,013,647           26,326,012  
               
Other assets            
Intangible assets, net     7,124,474           7,653,269  
Net investment in sales-type leases     3,055,752           3,477,039  
Deferred income taxes     688,000           688,000  
Long-term investments - available for sale     1,030,750           1,055,750  
Long-term investments - held to maturity     38,858,034           5,467,318  
Other non-current assets     1,869,406           2,078,165  
Total other assets     52,626,416           20,419,541  
               
Total assets   $ 158,023,746         $ 153,136,512  
               
LIABILITIES AND STOCKHOLDERS' EQUITY            
               
Current liabilities            
Accounts payable and other current liabilities   $ 9,561,210         $ 12,874,798  
Unearned revenues     10,725,560           10,678,427  
Total current liabilities     20,286,770           23,553,225  
               
Commitments and contingencies            
               
Stockholders' equity            

Common stock, $.01 par value, authorized 30,000,000 shares; 26,245,318 and 26,053,318 issued as of 2010 and 2009, respectively

    262,453           260,533  
Capital in excess of par value     100,889,495           94,329,398  
Retained earnings     75,904,995           74,015,940  
Accumulated other comprehensive loss     (315,542 )         (18,159 )
Less cost of treasury stock, 5,687,631 shares in 2010 and 2009     (39,004,425 )         (39,004,425 )
Total stockholders' equity     137,736,976           129,583,287  
               
Total liabilities and stockholders' equity   $ 158,023,746         $ 153,136,512  
             
STRATASYS, INC.
                         
RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS
                         
                         
      Non-GAAP Adjustments for the Three Months Ended June 30, 2010       Non-GAAP Adjustments for the Three Months Ended June 30, 2009  
      Consolidated   Consolidated       Consolidated   Consolidated  
      (unaudited) Stock-Based (unaudited)       (unaudited) Stock-Based (unaudited)  
      As Reported Compensation (1) Non-GAAP       As Reported Compensation (1) Non-GAAP  
                         
                         
Selling, general and administrative expenses   $ 8,198,063 $ (310,544 ) $ 7,887,519       $ 8,467,618   $ (182,374 ) $ 8,285,244    
                         
Total operating expenses     10,748,896   (310,544 )   10,438,352         10,122,824     (182,374 )   9,940,450    
                         
Operating income     4,013,108   310,544     4,323,652         1,450,397     182,374     1,632,771    
                         
Income before income taxes     3,714,022   310,544     4,024,566         1,300,569     182,374     1,482,943    
Income taxes     1,381,867   48,712     1,430,579         450,998     20,000     470,998    
                         
Net income   $ 2,332,155 $ 261,832   $ 2,593,987       $ 849,571   $ 162,374   $ 1,011,945    
                         
Earnings per common share                      
Basic   $ 0.11 $ 0.01   $ 0.13       $ 0.04   $ 0.01   $ 0.05    
Diluted   $ 0.11 $ 0.01   $ 0.12       $ 0.04   $ 0.01   $ 0.05    
                         

Weighted average number of common shares outstanding

                     
Basic     20,527,571     20,527,571         20,223,139       20,223,139    
Diluted     21,070,029     21,070,029         20,242,197       20,242,197    
                         
                         
                         
                         
      Non-GAAP Adjustments for the Six Months Ended June 30, 2010   Non-GAAP Adjustments for the Six Months Ended June 30, 2009
      Consolidated       Consolidated   Consolidated     Consolidated
      (unaudited) Stock-Based Fair Value   (unaudited)   (unaudited) Stock-Based   (unaudited)
      As Reported Compensation (2) of Warrant (3)   Non-GAAP   As Reported Compensation (1) Restructuring (4) Non-GAAP
                         
                         
Net sales   $ 53,065,815 $ -   $ 4,987,806   $ 58,053,621   $ 47,793,078   $ -   $ -   $ 47,793,078
                         
Gross profit     24,182,080   -     4,987,806     29,169,886     21,145,574     -     -     21,145,574
                         
Selling, general and administrative expenses     15,981,782   (621,088 )   -     15,360,694     17,775,827     (432,927 )   (778,840 )   16,564,060
                         
Total operating expenses     20,931,113   (621,088 )   -     20,310,025     21,302,792     (432,927 )   (778,840 )   20,091,025
                         
Operating income (loss)     3,250,967   621,088     4,987,806     8,859,861     (157,218 )   432,927     778,840     1,054,549
                         
Income before income taxes     2,826,066   621,088     4,987,806     8,434,960     229,633     432,927     778,840     1,441,400
Income taxes     937,010   209,120     1,796,510     2,942,640     83,990     74,000     266,907     424,897
                         
Net income   $ 1,889,056 $ 411,968   $ 3,191,296   $ 5,492,320   $ 145,643   $ 358,927   $ 511,933   $ 1,016,503
                         
Earnings per common share                      
Basic   $ 0.09 $ 0.02   $ 0.16   $ 0.27   $ 0.01   $ 0.02   $ 0.03   $ 0.05
Diluted   $ 0.09 $ 0.02   $ 0.15   $ 0.26   $ 0.01   $ 0.02   $ 0.03   $ 0.05
                         

Weighted average number of common shares outstanding

                     
Basic     20,485,059         20,485,059     20,221,995         20,221,995
Diluted     21,047,241         21,047,241     20,236,245         20,236,245
                         

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) - Represents non-cash stock-based compensation expense and an additional tax benefit realized from disqualifying dispositions of stock options.

(3) - Represents the fair value of a warrant issued during the first quarter of 2010 in connection with the Hewlett-Packard Company OEM agreement.

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

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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