May 4, 2011

Stratasys Reports Record First Quarter Financial Results

Fortus System Sales Expand by 60% in Q1

MINNEAPOLIS, May 04, 2011 (BUSINESS WIRE) -- Stratasys, Inc. (NASDAQ:SSYS) today announced first quarter financial results.

The company reported record revenue of $34.3 million for the first quarter ended March 31, 2011, versus $23.0 million reported for the same period in 2010. The first quarter of last year included a $5.0 million one-time non-cash charge against revenue, representing 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.

The first quarter revenue of $34.3 million represented a 23% increase over the non-GAAP revenue of $28.0 million for the same period in 2010, which excludes the warrant charge. System shipments for the first quarter totaled 567 units versus 610 units for the same period last year.

The company reported net income of $5.0 million for the first quarter or $0.23 per share compared to a net loss of $443,000 or $0.02 per share for the same period last year.

Non-GAAP net income, which excludes certain discrete items and stock-based compensation expense, was $4.4 million or $0.21 per share, for the first quarter of 2011, a 54% increase compared to the non-GAAP net income of $2.9 million or $0.14 per share for the same period last year.

Non-GAAP net income for the first quarter of 2011 excludes the impact of a one-time gain of $698,000 net of tax, or $0.03 per share, associated with the sale of an investment. Non-GAAP net income for the first quarter of 2011 also excludes the impact of stock-based compensation expense, which amounted to $147,000 net of tax, or $0.01 per share.

Non-GAAP net income for the first quarter of 2010 excludes the warrant charge which amounted to $3.2 million net of tax, or $0.16 per share. Non-GAAP net income for the first quarter of 2010 also excludes the impact of stock-based compensation expense which amounted to $150,000 net of tax, or $0.01 per share.

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.

"The strong first quarter results reflect a continuation of the positive trends we have observed over the past year, as demand for our products has strengthened," said Scott Crump, chairman and chief executive officer of Stratasys. "Sales of our Fortus 3D production systems expanded by 60% over last year, driven by the demand for direct digital manufacturing applications. In addition, strong growth in our higher-margin products contributed to a significant increase in gross margin both sequentially and year-over-year.

"Revenue from consumables, our highest margin product, grew by 36% during the first quarter over last year, the fastest quarterly growth rate in over four years. This growth is being driven by a significant acceleration in customer usage, as well as from our growing installed base of systems. We are optimistic that this growth can continue given the positive trends within our markets and our expectation of continued growth in our installed base.

"We continue to make progress in our game-changing agreement with HP. Unit sales of 3D printers into markets served by HP experienced strong growth during the first quarter, increasing by 49% over the products sold in those same markets last year. We are now looking forward to additional collaboration and the possible expansion into new European countries later this year. We remain confident that HP's distribution capabilities combined with their brand and marketing muscle can drive increased awareness and accelerated adoption of our proprietary 3D printers.

"Fortus system sales represented the fastest growing part of our business during the first quarter. New DDM applications remain the drivers behind this growth. Applications for aircraft repair and maintenance, as well as the production of fabrication tools to aid in manufacturing continue to be notable areas of expansion for our line of Fortus systems.

"We bolstered our DDM strategy this week with the acquisition of Solidscape, a leading provider of 3D printers targeting applications for investment casting and mold making. Solidscape's 3D printers are marketed worldwide and are known for the production of highly-castable wax parts with fine feature detail and smooth surface finish.

"The $38 million purchase of Solidscape will open new DDM markets for Stratasys, including jewelry, dental and industrial casting applications that require high precision. While Solidscape is the leading provider of systems for jewelry manufacturers, we see significant opportunities to develop their products beyond their core market. Additional information on the Solidscape acquisition can be found by accessing the link provided at the end of our first quarter press release.

"We remain pleased with the positive trends in our business during the first quarter and are optimistic regarding the balance of 2011. While we expect the acquisition of Solidscape will have a modest near-term positive impact on earnings, we are more excited about the longer-term potential of adding their product line and developing their technology for new DDM applications.

"We maintain a healthy balance sheet even with our acquisition of Solidscape, and we continue to generate significant cash from operations. And finally, we remain confident that our agreement with HP can significantly expand the sales of our 3D printers," Crump concluded.

Stratasys plans to hold a conference call to discuss its first quarter financial results on Wednesday, May 4, 2011 at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the Stratasys Web site at under the "Investors" tab; or directly at the following web address:

To participate by telephone, the domestic dial-in number is 888-396-2369 and the international dial-in is 617-847-8710. The access code is 34663165. 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.

Additional information regarding the acquisition of Solidscape can be accessed at the following web address:

(Financial tables follow)

Stratasys, Inc., Minneapolis, is a maker of additive manufacturing machines for prototyping and producing plastic parts. The company markets under the brands Dimension 3D Printers and Fortus 3D Production Systems. The company also operates RedEye On Demand, a digital manufacturing service for prototypes and production parts. According to Wohlers Report 2010, Stratasys supplied more additive manufacturing systems in 2009 than any other manufacturer, 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 manufactured goods directly from any 3D CAD program, using high-performance industrial thermoplastics. The company holds more than 285 granted or pending additive manufacturing patents globally. Stratasys products are used in the aerospace, defense, automotive, medical, business and industrial equipment, education, architecture, and consumer-product industries. Online at:

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", "intends", "desires" 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 Fortus® 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 consumable materials, and the market acceptance of these 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 RedEyeOnDemandTM and other paid parts services. They also include statements about future financial and operating results of our company after the acquisition of Solidscape and anticipated benefits of the acquisition.Actual results may differ from those expressed or implied in our forward-looking statementsSuch forward-looking statements involve and are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those discussed in a forward-looking statement.Such risk factors include our ability to successfully integrate and market Solidscape products, our ability to retain Solidscape management and our ability to protect and defend Solidscape intellectual property. 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 current report on Form 8-K filed in connection with the completion of our acquisition of Solidscape and 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




Three Months Ended March 31,

Net sales        
Product   $ 27,837,165     $ 21,761,618  
Services     6,481,924       6,232,507  
Fair value of warrant related to OEM agreement     -       (4,987,806 )
      34,319,089       23,006,319  
Cost of sales        
Product     13,226,225       10,678,018  
Services     2,842,412       2,908,226  
      16,068,637       13,586,244  
Gross profit     18,250,452       9,420,075  
Operating expenses        
Research and development     3,348,093       2,398,498  
Selling, general and administrative     8,736,231       7,783,720  
      12,084,324       10,182,218  
Operating income (loss)     6,166,128       (762,143 )
Other income (expense)        
Interest income, net     205,781       215,199  
Foreign currency transaction losses, net     (131,115 )     (359,255 )
Other, net     1,396,606       18,240  
      1,471,272       (125,816 )
Income (loss) before income taxes     7,637,400       (887,959 )
Income tax expense (benefit)     2,647,905       (444,858 )
Net income (loss)   $ 4,989,495     $ (443,101 )
Earnings (loss) per common share        
Basic   $ 0.24     $ (0.02 )
Diluted   $ 0.23     $ (0.02 )

Weighted average number of common shares outstanding

Basic     21,009,871       20,441,217  
Diluted     21,647,691       20,441,217  



    March 31,
  December 31,
Current assets        
Cash and cash equivalents   $ 36,084,783     $ 27,554,411  
Short-term investments - held to maturity     8,356,348       8,797,878  

Accounts receivable, less allowance for doubtful accounts of $1,101,603 at March 31, 2011 and $1,094,588 at December 31, 2010

    21,879,418       20,051,451  
Inventories     18,821,007       17,880,714  

Net investment in sales-type leases, less allowance for doubtful accounts of $148,791 at March 31, 2011 2010 and $189,338 at December 31, 2010

    4,108,652       3,096,911  
Prepaid expenses and other current assets     3,345,950       3,384,394  
Deferred income taxes     3,447,000       3,447,000  
Total current assets     96,043,158       84,212,759  
Property and equipment, net     30,410,099       29,872,945  
Other assets        
Intangible assets, net     8,430,706       6,405,714  
Net investment in sales-type leases     2,960,428       3,067,446  
Long-term investments - available for sale     1,160,250       1,185,250  
Long-term investments - held to maturity     52,369,990       52,504,650  
Other non-current assets     248,267       1,210,867  
Total other assets     65,169,641       64,373,927  
Total assets   $ 191,622,898     $ 178,459,631  
Current liabilities        
Accounts payable and other current liabilities   $ 14,232,524     $ 14,408,628  
Unearned revenues     12,419,238       11,561,521  
Total current liabilities     26,651,762       25,970,149  
Non-current liabilities        
Deferred tax liabilities     207,000       207,000  
Total liabilities     26,858,762       26,177,149  
Commitments and contingencies        
Stockholders' equity        

Common stock, $.01 par value, authorized 30,000,000 shares; 26,819,025 and 26,509,518 issued as of March 31, 2011 and December 31, 2010, respectively

    268,190       265,095  
Additional paid-in capital     115,049,413       107,781,990  
Retained earnings     88,374,979       83,385,484  
Accumulated other comprehensive income (loss)     75,979       (145,662 )
Treasury stock at cost, 5,687,631 shares as of 2011 and 2010     (39,004,425 )     (39,004,425 )
Total stockholders' equity     164,764,136       152,282,482  
Total liabilities and stockholders' equity   $ 191,622,898     $ 178,459,631  




Non-GAAP Adjustments for the Three Months Ended March 31, 2011


Non-GAAP Adjustments for the Three Months Ended March 31, 2010


Consolidated (unaudited) As Reported


Stock-Based Compensation (1)


Sale of Equity Investment (2)


Consolidated (unaudited) Non-GAAP


Consolidated (unaudited) As Reported


Stock-Based Compensation (1)


Fair Value of Warrant (3)


Consolidated (unaudited) Non-GAAP

Net sales   $ 34,319,089   $ -     $ -     $ 34,319,089   $ 23,006,319     $ -     $ 4,987,806   $ 27,994,125  
Gross profit     18,250,452     -       -       18,250,452     9,420,075       -       4,987,806     14,407,881  
Selling, general and administrative expenses     8,736,231     (323,598 )     -       8,412,633     7,783,720       (310,544 )     -     7,473,176  
Total operating expenses     12,084,324     (323,598 )     -       11,760,726     10,182,218       (310,544 )     -     9,871,674  
Operating income (loss)     6,166,128     323,598       -       6,489,726     (762,143 )     310,544       4,987,806     4,536,207  
Other income (expense)     1,471,272     -       (1,204,408 )     266,864     (125,816 )     -       -     (125,816 )
Income (loss) before income taxes     7,637,400     323,598       (1,204,408 )     6,756,590     (887,959 )     310,544       4,987,806     4,410,391  
Income tax expense (benefit)     2,647,905     176,458       (506,655 )     2,317,708     (444,858 )     160,408       1,796,510     1,512,060  
Net income (loss)   $ 4,989,495   $ 147,140     $ (697,753 )   $ 4,438,882   $ (443,101 )   $ 150,136     $ 3,191,296     2,898,331  
Earnings (loss) per common share                                
Basic   $ 0.24   $ 0.01     $ (0.03 )   $ 0.21   $ (0.02 )   $ 0.01     $ 0.16   $ 0.14  
Diluted   $ 0.23   $ 0.01     $ (0.03 )   $ 0.21   $ (0.02 )   $ 0.01     $ 0.16   $ 0.14  

Weighted average number of common shares outstanding

Basic     21,009,871             21,009,871     20,441,217               20,441,217  
Diluted     21,647,691             21,647,691     20,441,217               21,023,133  

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 gain on sale of an equity investment during the first quarter of 2011.

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

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

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