Exhibit 99.1

STRATASYS LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2019

(UNAUDITED)

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INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019
(UNAUDITED)

Item		Page
Consolidated Balance Sheets		2
Consolidated Statements of Operations and Comprehensive Loss		3
Consolidated Statements of Changes in Equity		4-5
Consolidated Statements of Cash Flows		6
Notes to Condensed Consolidated Financial Statements		7-18

1

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STRATASYS LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Consolidated Balance Sheets
(in thousands, except share data)
		September 30, 2019				December 31, 2018
ASSETS
Current assets
Cash and cash equivalents		$	347,082			$	393,167
Accounts receivable, net			133,743				138,146
Inventories			164,742				123,524
Prepaid expenses			7,646				6,398
Other current assets			29,765				22,936
Total current assets			682,978				684,171
Non-current assets
Property, plant and equipment, net			187,712				188,150
Goodwill			385,332				385,849
Other intangible assets, net			90,297				107,274
Operating lease right-of-use assets			21,757				-
Other non-current assets			22,977				22,810
Total non-current assets			708,075				704,083
Total assets		$	1,391,053			$	1,388,254
LIABILITIES AND EQUITY
Current liabilities
Accounts payable		$	43,139			$	45,855
Current portion of long-term debt			-				5,143
Accrued expenses and other current liabilities			33,176				39,115
Accrued compensation and related benefits			35,413				31,703
Deferred revenues			53,214				53,965
Operating lease liabilities - short term			9,016				-
Total current liabilities			173,958				175,781
Non-current liabilities
Long-term debt			-				22,000
Deferred revenues - long-term			15,742				18,422
Operating lease liabilities - long term			13,303				-
Other non-current liabilities			32,580				29,084
Total non-current liabilities			61,625				69,506
Total liabilities		$	235,583			$	245,287
Contingencies (see note 11)
Redeemable non-controlling interests			700				852
Equity
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 54,428 thousands shares and 53,881 thousands shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively			148				146
Additional paid-in capital			2,701,974				2,681,048
Accumulated other comprehensive loss			(7,967	)			(7,753	)
Accumulated deficit			(1,539,385	)			(1,531,326	)
Total equity			1,154,770				1,142,115
Total liabilities and equity		$	1,391,053			$	1,388,254

The accompanying notes are an integral part of these consolidated financial statements.

2

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STRATASYS LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Consolidated Statements of Operations and Comprehensive Loss
		Three Months Ended September 30,								Nine Months Ended September 30,
in thousands, except per share data		2019				2018				2019				2018
Net sales
Products		$	106,346			$	109,647			$	321,778			$	331,967
Services			51,114				52,402				154,145				154,151
			157,460				162,049				475,923				486,118
Cost of sales
Products			44,341				48,640				135,605				147,120
Services			35,710				34,481				105,285				100,773
			80,051				83,121				240,890				247,893
Gross profit			77,409				78,928				235,033				238,225
Operating expenses
Research and development, net			23,620				25,786				70,234				74,585
Selling, general and administrative			59,741				49,792				173,217				168,684
			83,361				75,578				243,451				243,269
Operating income (loss)			(5,952	)			3,350				(8,418	)			(5,044	)
Financial income (expense), net			289				(39	)			2,796				(114	)
Income (loss) before income taxes			(5,663	)			3,311				(5,622	)			(5,158	)
Income tax expenses			586				304				3,084				1,110
Share in profit (losses) of associated companies			(733	)			(3,752	)			495				(11,185	)
Net loss		$	(6,982	)		$	(745	)		$	(8,211	)		$	(17,453	)
Net loss attributable to non-controlling interests			(41	)			(66	)			(152	)			(182	)
Net loss attributable to Stratasys Ltd.		$	(6,941	)		$	(679	)		$	(8,059	)		$	(17,271	)
Net loss per ordinary share attributable to Stratasys Ltd. - basic and diluted		$	(0.13	)		$	(0.01	)		$	(0.15	)		$	(0.34	)
Weighted average ordinary shares outstanding. - basic and diluted			54,394				53,769				54,201				53,716
Comprehensive loss
Net loss			(6,982	)			(745	)			(8,211	)			(17,453	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments			(954	)			(234	)			(1,398	)			(1,445	)
Unrealized gains (losses) on derivatives designated as cash flow hedges			34				522				1,184				(347	)
Other comprehensive income (loss), net of tax			(920	)			288				(214	)			(1,792	)
Comprehensive loss			(7,902	)			(457	)			(8,425	)			(19,245	)
Less: comprehensive loss attributable to non-controlling interests			(41	)			(66	)			(152	)			(182	)
Comprehensive loss attributable to Stratasys Ltd.		$	(7,861	)		$	(391	)		$	(8,273	)		$	(19,063	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

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STRATASYS LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Consolidated Statements of Changes in Equity
(in thousands)
Three and Nine Months Ended September 30, 2019
															Accumulated
		Ordinary Shares						Additional							Other				Equity
		Number of						Paid-In			Accumulated				Comprehensive				attributable to				Non-controlling			Total
		shares		Par Value				Capital			deficit				Loss				Stratasys Ltd.				Interests			Equity
Balance as of December 31, 2018		53,881			146				2,681,048			(1,531,326	)			(7,753	)			1,142,115				-			1,142,115
Issuance of shares in connection with stock-based compensation plans		167				*			2,222			-				-				2,222				-			2,222
Stock-based compensation		-			-				4,229			-				-				4,229				-			4,229
Comprehensive loss		-			-				-			(2,270	)			568				(1,702	)			-			(1,702	)
Balance as of March 31, 2019		54,048		$	146			$	2,687,499		$	(1,533,596	)		$	(7,185	)		$	1,146,864			$	-		$	1,146,864
Issuance of shares in connection with stock-based compensation plans		296			1				2,030			-				-				2,031				-			2,031
Stock-based compensation		-			-				6,093			-				-				6,093				-			6,093
Comprehensive income		-			-				-			1,152				138				1,290				-			1,290
Balance as of June 30, 2019		54,344		$	147			$	2,695,622		$	(1,532,444	)		$	(7,047	)		$	1,156,278			$	-		$	1,156,278
Issuance of shares in connection with stock-based compensation plans		84			1				917			-				-				918				-			918
Stock-based compensation		-							5,435			-				-				5,435				-			5,435
Comprehensive loss		-										(6,941	)			(920	)			(7,861	)			-			(7,861	)
Balance as of September 30, 2019		54,428		$	148			$	2,701,974		$	(1,539,385	)		$	(7,967	)		$	1,154,770			$	-		$	1,154,770

*Represents an amount less than 0.5 thousand

4

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STRATASYS LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Consolidated Statements of Changes in Equity
(in thousands)
Three and Nine Months Ended September 30, 2018
																	Accumulated
		Ordinary Shares							Additional								Other				Equity
		Number of							Paid-In				Accumulated				Comprehensive				attributable to				Non-controlling				Total
		shares			Par Value				Capital				deficit				Loss				Stratasys Ltd.				Interests				Equity
Balance as of December 31, 2017			53,631			145				2,663,274				(1,523,906	)			(7,023	)			1,132,490				17				1,132,507
Cumulative effect of changes in accounting principles			-			-				-				3,544				-				3,544				-				3,544
Issuance of shares in connection with stock-based compensation plans			79				*			334				-				-				334				-				334
Stock-based compensation			-			-				3,415				-				-				3,415				-				3,415
Comprehensive loss			-			-				-				(13,041	)			1,686				(11,355	)			(34	)			(11,389	)
Balance as of March 31, 2018			53,710		$	145			$	2,667,023			$	(1,533,403	)		$	(5,337	)		$	1,128,428			$	(17	)		$	1,128,411
Issuance of shares in connection with stock-based compensation plans			19			1				38				-				-				39				-				39
Stock-based compensation			-			-				4,278				-				-				4,278				-				4,278
Purchase of redeemable non-controlling interests			-			-				(935	)			-				-				(935	)			-				(935	)
Comprehensive loss			-			-				-				(3,551	)			(3,766	)			(7,317	)			17				(7,300	)
Balance as of June 30, 2018			53,729		$	146			$	2,670,404			$	(1,536,954	)		$	(9,103	)		$	1,124,493			$	-			$	1,124,493
Issuance of shares in connection with stock-based compensation plans			81				*			1,344				(0	)			-				1,344				-				1,344
Stock-based compensation			-			-				4,013				-				-				4,013				-				4,013
Purchase of redeemable non-controlling interests			-			-				1				-				-				1				-				1
Comprehensive loss			-			-								(679	)			288				(391	)			-				(391	)
Balance as of September 30, 2018		$	53,810		$	146			$	2,675,762			$	(1,537,633	)		$	(8,815	)		$	1,129,460			$	-			$	1,129,460

* Represents an amount less than 0.5 thousand

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STRATASYS LTD.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Consolidated Statements of Cash Flows
		Nine Months Ended September 30,
in thousands		2019				2018
Cash flows from operating activities
Net loss		$	(8,211	)		$	(17,453	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			37,934				45,902
Stock-based compensation			15,757				11,706
Foreign currency transaction loss (gain)			777				3,450
Deferred income taxes			(1,667	)			(3,733	)
Share in (profits) losses of associated companies			(495	)			11,185
Gain from sale of subsidiaries and unconsolidated entity			(3,578	)			(7,932	)
Other non-cash items, net			720				2,577
Change in cash attributable to changes in operating assets and liabilities:
Accounts receivable, net			2,827				1,681
Inventories			(44,925	)			(7,723	)
Net investment in sales-type leases			2,450				6,120
Other current assets and prepaid expenses			(6,922	)			(2,980	)
Other non-current assets			5,377				(1,075	)
Accounts payable			(4,793	)			(289	)
Other current liabilities			(424	)			3,330
Deferred revenues			(2,764	)			2,504
Other non-current liabilities			172				(2,222	)
Net cash provided by (used in) operating activities			(7,765	)			45,048
Cash flows from investing activities
Purchase of property and equipment			(16,472	)			(18,908	)
Investment in unconsolidated entities			(4,500	)			(13,015	)
Purchase of intangible assets			(1,643	)			(1,114	)
Proceeds from sale of plant and property			129				4,105
Proceeds from sale of subsidiaries and unconsolidated entity			4,909				8,998
Other investing activities			(679	)			(229	)
Net cash used in investing activities			(18,256	)			(20,163	)
Cash flows from financing activities
Repayment of debt			(27,293	)			(3,857	)
Proceeds from exercise of stock options			5,169				2,379
Acquisition of redeemable non-controlling interests			-				(1,500	)
Net cash used in financing activities			(22,124	)			(2,978	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			1,602				(1,801	)
Net change in cash, cash equivalents and restricted cash			(46,543	)			20,106
Cash, cash equivalents and restricted cash, beginning of period			393,734				329,359
Cash, cash equivalents and restricted cash, end of period		$	347,191			$	349,465
Supplemental disclosures of cash flow information:
Transfer of fixed assets to inventory			201				380
Transfer of inventory to fixed assets			2,304				1,859

The accompanying notes are an integral part of these condensed consolidated financial statements.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Business Description and Basis of Presentation

Stratasys Ltd. (collectively with its subsidiaries, the “Company”) is a global provider of applied additive technology solutions for a broad range of industries. The Company focuses on customers’ business requirements and seeks to create new value for its customers across their product lifecycle processes, from design prototypes to manufacturing tools and final production parts. The Company operates a 3D printing ecosystem of solutions and expertise, comprised of: 3D printers ranging from entry-level desktop 3D printers to systems for rapid prototyping (“RP”) and large production systems for direct digital manufacturing (“DDM”) based on precise fused deposition modeling (“FDM”) and PolyJet technologies; advanced materials for use with its 3D printers; software with voxel level control; application-based services; on-demand parts; and key partnerships.

The condensed consolidated interim financial statements include the accounts of Stratasys Ltd. and its subsidiaries. All intercompany accounts and transactions, including profits from intercompany sales not yet realized outside the Company, have been eliminated in consolidation.

The consolidated interim financial information herein is unaudited; however, such information reflects all adjustments (consisting of normal, recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim period. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year. Certain financial information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. The reader is referred to the audited consolidated financial statements and notes thereto for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission (the “SEC”) as part of the Company’s Annual Report on Form 20-F for such year on March 7, 2019.

Note 2. New Accounting Pronouncements

Accounting Pronouncements Adopted in the Current Period

In July 2019, the Financial Accounting Standards Board (“FASB”) issued a new Accounting Standards Update (“ASU”) which aligns the disclosure and presentation requirements of a variety of codification topics with the SEC’s regulations. Company adopted this guidance upon its issuance, which has not had a material impact on its consolidated financial statements.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued a new Accounting Standards Update (“ASU”) which substantially aligns the measurement and classification guidance for share-based payments to non-employees with the guidance for share-based payments to employees. That ASU also clarifies that any share-based payment issued to a customer should be evaluated based upon the new revenue recognition standard. The new ASU required a modified retrospective transition approach. The Company adopted this guidance effective January 1, 2019, which has not had a material impact on its consolidated financial statements.

In August 2017, the FASB issued an ASU which simplifies the designation and measurement requirements of hedge accounting in certain situations and allows companies to better align their hedge accounting with their risk management activities. The ASU also eases certain hedge effectiveness assessment requirements, expands the eligibility of hedging strategies that may qualify for hedge accounting and modifies certain presentation and disclosure requirements. The Company adopted this guidance effective January 1, 2019, which has not had a material impact on its consolidated financial statements.

In February 2016, the FASB issued a new ASU which amended its lease accounting guidance. Under the new lease accounting guidance, lessees are required to recognize a right-of-use asset and a lease liability for all leases, including leases classified as operating leases. The lease liability and the right-of-use asset are measured based on the present value of the lease payments. In addition, disclosures of qualitative and quantitative information about leasing arrangements are required. The new lease accounting guidance also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components of an arrangement.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company adopted the new lease accounting guidance on January 1, 2019, using a modified retrospective transition approach, with certain practical expedients, and as a result did not adjust prior periods. Following the adoption, the Company recognized right-of-use assets of $27.4 million and lease liabilities of $27.9 million for its operating leases. The Company does not have material finance leases. The new lease accounting guidance had no material impact on the Company's Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and no material impact on the Condensed Consolidated Statements of Cash Flows.

The Company determines whether an arrangement contains a lease at the inception of a contract. If an arrangement is a lease, the Company determines whether it is an operating lease or a finance lease. The Company's lease terms include all non-cancelable periods and may include options to extend the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company elected the short-term lease recognition exemption for all leases with terms shorter than twelve months.

The right-of-use assets represent the Company's right to control the use of an underlying asset for the lease term. The lease liabilities represent the present value of the Company's future lease payments over the expected lease term, which is determined using the Company's incremental borrowing rate at the lease commencement date. This rate is determined considering factors such as the lease term, credit standing and the economic environment of the location of the lease.

The Company's leases primarily relate to buildings for the Company’s administrative, research and development, sales and marketing, and manufacturing activities, as well as vehicles leases.

As of September 30, 2019, the weighted average remaining lease term for the Company’s leases was 3.1 years, and weighted-average discount rate was 4.7%.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued an ASU that clarifies the accounting for implementation costs in cloud computing arrangements. This ASU requires the implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customers in a software licensing arrangement. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of the new guidance on its consolidated financial statements.

In June 2016, the FASB issued an ASU that supersedes the existing impairment model for most financial assets to a current expected credit loss model. The new guidance requires an entity to recognize an impairment allowance equal to its current estimate of all contractual cash flows the entity does not expect to collect. The ASU also requires that credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of the new guidance on its consolidated financial statements.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3. Revenues

Disaggregation of Revenues

The following table presents the Company’s revenues disaggregated by geographical region (based on the Company's customers' locations) and revenue type for the three and nine months ended September 30, 2019 and 2018:

		Three months ended September 30,						Nine months ended September 30,
		2019			2018			2019			2018
		(U.S. $ in thousands)						(U.S. $ in thousands)
Americas
Products		$	67,088		$	64,257		$	192,279		$	181,695
Service			39,816			40,770			119,149			118,036
Total Americas			106,904			105,027			311,428			299,731
EMEA
Products			22,710			25,880			74,119			87,808
Service			6,223			6,556			19,747			20,826
Total EMEA			28,933			32,436			93,866			108,634
Asia Pacific
Products			16,548			19,511			55,380			62,464
Service			5,075			5,075			15,249			15,289
Total Asia Pacific			21,623			24,586			70,629			77,753
Total Revenues		$	157,460		$	162,049		$	475,923		$	486,118

The following table presents the Company’s revenues disaggregated based on the timing of revenue recognized for the three and nine months ended September 30, 2019 and 2018:

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Contract Assets and Contract Liabilities

Contract assets are recorded when the Company's right to consideration is conditional on constraints other than the passage of time. The Company had no material contract assets as of September 30, 2019.

Contract liabilities include advance payments and billings in excess of revenue recognized, which are primarily related to advanced billings for service type warranty. Contract liabilities are presented under deferred revenues. The Company's deferred revenues as of September 30, 2019 and December 31, 2018 were as follows:

*Includes $15.7 million and $18.4 million under long-term deferred revenue in the Company's consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively.

Revenue recognized in 2019 that was included in deferred revenue balance as of January 1, 2019 was $10.9 million and $42.8 million for the three and nine months ended September 30, 2019, respectively.

Remaining Performance Obligations

Remaining Performance Obligations ("RPO") represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of September 30, 2019, the total RPO amounted to 89.4 million. The Company expects to recognize $70.1 million of this RPO during the next 12 months, $14.0 million over the subsequent 12 months and the remaining $5.3 million thereafter.

Incremental Costs of Obtaining a Contract

Sales commissions earned mainly by the Company’s sales agents are considered incremental costs of obtaining a contract with a customer, as the Company expects the benefit of those commissions to be longer than one year. The majority of the sales commissions are not subject to capitalization, as the commission expense is recognized as the related revenue is recognized. Sales commissions for initial contracts related to the service type warranty are deferred and then amortized on a straight-line basis over the expected customer relationship period if the Company expects to recover those costs. Amortization expense is included in selling, general and administrative expenses in the consolidated statements of operations. As of September 30, 2019 and December 31, 2018, the deferred commission amounted to $3.7 million and $3.1 million respectively.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Inventories

Inventories consisted of the following:

		September 30,			December 31,
		2019			2018
		U.S. $ in thousands
Finished goods		$	87,046		$	61,391
Work-in-process			3,388			2,616
Raw materials			74,308			59,517
			164,742			123,524

Note 5. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of the Company’s goodwill for the nine-months ended September 30, 2019 were as follows:

During the fourth quarter of 2018, the Company performed a quantitative assessment for goodwill impairment for its Stratasys-Objet reporting unit.

Following its quantitative assessment, the Company concluded that the fair value of its Stratasys-Objet reporting unit exceeded its carrying amount by approximately 8%, with a carrying amount of goodwill assigned to this reporting unit in an amount of $386 million.

When evaluating the fair value of its Stratasys-Objet reporting unit the Company used a discounted cash flow model which utilized Level 3 measures that represent unobservable inputs into the valuation method. Key assumptions used to determine the estimated fair value include: (a) expected cash flows for five years following the assessment date which were based on, among other factors, expected revenue growth, costs to produce, operating profit margins and estimated capital needs; (b) an estimated terminal value that utilized a terminal year growth rate of 3.1% that was determined based on the growth prospects of the reporting unit; and (c) a discount rate of 14.0% based on management’s best estimate of the after-tax weighted average cost of capital. If any of these were to vary materially from the Company's estimates, the Company could face impairment of goodwill allocated to this reporting unit in the future.

Actual results may differ from those assumed in the Company's valuation method. It is reasonably possible that the Company's assumptions described above could change in future periods. If any of these were to vary materially from the Company's plans, it may record impairment of goodwill allocated to this reporting unit in the future.

A hypothetical decrease in the growth rate of 1% or an increase of 1% to the discount rate would have reduced the fair value of Stratasys-Objet reporting unit by approximately $48 million and $80 million, respectively.

Based on the Company’s assessment as of December 31, 2018, no goodwill was determined to be impaired.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the third quarter of 2019 the Company reaffirmed that no significant events or circumstances occurred that contradict the assumptions and data used in the annual impairment test performed in the fourth quarter of 2018.

Determining the fair value of the Stratasys-Objet reporting unit requires significant judgment, including judgments about the appropriate discount rates, terminal growth rates, weighted average costs of capital and the amount and timing of projected future cash flows. The Company will continue to monitor the fair value of its Stratasys-Objet reporting unit to determine whether events and changes in circumstances such as a deterioration in the business climate or operating results, significant decline in the Company's share price, changes in management’s business strategy or downward changes of the Company's cash flows projections, warrant further interim impairment testing.

Other Intangible Assets

Other intangible assets consisted of the following:

		September 30, 2019										December 31, 2018
		Carrying Amount,							Net			Carrying Amount,							Net
		Net of			Accumulated				Book			Net of			Accumulated				Book
		Impairment			Amortization				Value			Impairment			Amortization				Value
		U.S. $ in thousands
Developed technology		$	299,100		$	(248,197	)		$	50,903		$	299,100		$	(236,375	)		$	62,725
Patents			11,739			(6,510	)			5,229			10,127			(5,752	)			4,375
Trademarks and trade names			26,235			(19,933	)			6,302			26,212			(19,067	)			7,145
Customer relationships			102,837			(75,116	)			27,721			102,984			(70,353	)			32,631
Capitalized software development costs			19,541			(19,399	)			142			19,540			(19,142	)			398
		$	459,452		$	(369,155	)		$	90,297		$	457,963		$	(350,689	)		$	107,274

Amortization expense relating to intangible assets for the three-month periods ended September 30, 2019 and 2018 was approximately $6.5 million and $8.0 million, respectively. Amortization expense relating to intangible assets for the nine-month periods ended September 30, 2019 and 2018 was approximately $18.6 million and $24.2 million, respectively.

As of September 30, 2019, the estimated amortization expense relating to intangible assets for each of the following periods was as follows:

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Loss Per Share

The following table presents the numerator and denominator of the basic and diluted net loss per share computations for the three and nine months ended September 30, 2019 and 2018:

The computation of diluted net loss per share excluded share awards of 4.5 million shares and 4.2 million shares for the three and nine months ended September 30, 2019 and 2018, respectively, because their inclusion would have had an anti-dilutive effect on the diluted net loss per share

Note 7. Income Taxes

The Company had a negative effective tax rate of 10.3% for the three-month period ended September 30, 2019 compared to an effective tax rate of 9.2% for the three-month period ended September 30, 2018, and a negative effective tax rate of 54.8% for the nine-month period ended September 30, 2019 compared to a negative effective tax rate of 21.5% for the nine-month period ended September 30, 2018. The Company’s effective tax rate as of September 30, 2019 was primarily impacted by the geographic mix of its earnings and losses, as well as a valuation allowance on losses of the Company's US subsidiaries.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 8. Fair Value Measurements

Financial instruments measured at fair value

The following table summarizes the Company’s financial assets and liabilities that are carried at fair value on a recurring basis, in its consolidated balance sheets:

The Company’s foreign exchange forward contracts are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs).

Other financial instruments consist mainly of cash and cash equivalents, current and non-current receivables, net investment in sales-type leases, bank loan, accounts payable and other current liabilities. The fair value of these financial instruments approximates their carrying values.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 9. Derivative instruments and hedging activities

Since the Company conducts its operations globally, it is exposed to global market risks and to the risk that its earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates. The Company enters into transactions involving foreign currency exchange derivative financial instruments. The Company manages its foreign currency exposures on a consolidated basis, which allows the Company to net exposures and take advantage of any natural hedging. The transactions are designed to manage the Company’s net exposure to foreign currency exchange rates and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company does not enter into derivative transactions for trading purposes.

The Company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities and forecasted transactions denominated in the New Israeli Shekel (“NIS”), Euro, Korean Won, Chinese Yuan and the Japanese Yen. The gains and losses on the hedging instruments partially offset losses and gains on the hedged items. Financial markets and currency volatility may limit the Company’s ability to hedge these exposures.

The following table summarizes the consolidated balance sheets classification and fair values of the Company’s derivative instruments:

				Fair Value								Notional Amount
				September 30,				December 31,				September 30,			December 31,
		Balance sheet location		2019				2018				2019			2018
				U.S. $ in thousands
Assets derivatives -Foreign exchange contracts, not designated as hedging instruments		Other current assets		$	857			$	374			$	66,206		$	34,695
Assets derivatives -Foreign exchange contracts, designated as cash flow hedge		Other current assets			556				-				16,955			-
Liability derivatives -Foreign exchange contracts, not designated as hedging instruments		Accrued expenses and other current liabilities			(184	)			(196	)			21,907			54,425
Liability derivatives -Foreign exchange contracts, designated as hedging instruments		Accrued expenses and other current liabilities			-				(628	)			-			41,303
				$	1,229			$	(450	)		$	105,068		$	130,423

As of September 30, 2019, the notional amounts of the Company’s outstanding exchange forward contracts, not designated as hedging instruments, were $88.1 million, and were used to reduce foreign currency exposures. With respect to such derivatives, gains of $3.2 million and $0.6 million were recognized under financial income (expense), net for the three-month periods ended September 30, 2019 and 2018, respectively, and gains of $4.5 million and $1.5 million were recognized under financial income (expense), net for the nine-month periods ended September 30, 2019 and 2018, respectively. Such gains or losses partially offset the foreign currencies revaluation changes of the balance sheet items. These foreign currencies revaluation changes are also recognized under financial income (expense), net.

As of September 30, 2019, the Company had in effect foreign exchange forward contracts, designated as cash flow hedge for accounting purposes, for the conversion of $17.0 million into NIS. The Company uses short-term cash flow hedge contracts to reduce its exposure to variability in expected future cash flows resulting mainly from payroll costs denominated in NIS. The changes in fair value of those contracts are included in the Company’s accumulated other comprehensive loss. These contracts mature through June 2020.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 10. Equity

a. Stock-based compensation plans

Stock-based compensation expenses for equity-classified stock options, restricted share units (“RSUs”) and performance stock units ("PSUs") were allocated as follows:

A summary of the Company’s stock option activity for the nine months ended September 30, 2019 is as follows:

During the nine-month periods ended September 30, 2019 and 2018, the Company issued 242,317 shares and 87,158 shares, respectively, upon the exercise of stock options. This resulted in an increase in equity of $5.2 million and $1.7 million for the nine-month periods ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, the unrecognized compensation cost of $5.1 million related to all unvested, equity-classified stock options is expected to be recognized as an expense over a weighted-average period of 1.4 years.

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

A summary of the Company’s RSUs and PSUs activity for the nine months ended September 30, 2019 is as follows:

The fair value of RSUs and PSUs is determined based on the quoted price of the Company’s ordinary shares on the date of the grant.

As of September 30, 2019, the unrecognized compensation cost of $45.1 million related to all unvested, equity-classified RSUs and PSUs is expected to be recognized as expense over a weighted-average period of 2.9 years.

b. Accumulated other comprehensive loss

The following tables present the changes in the components of accumulated other comprehensive income (loss), net of taxes, for the nine months ended September 30, 2019 and 2018, respectively:

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STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 11. Contingencies

Patent Law-Based Claim

On November 23, 2017, a former employee, whose employment had been terminated by the Company in 2008 and who had previously unsuccessfully filed a suit against the Company, brought an additional proceeding against the Company under Section 134 of the Israeli Patent Law seeking compensation and royalties for service inventions he invented while he served as an employee of the Company. In this new proceeding, the former employee claims to be entitled to receive royalties in an amount equal to: (a) 20% of the benefits, revenues and /or savings generated by the Company in the past and in the future, including the rise in the value of the Company, as determined in the merger with Stratasys Inc., which took place in December 2012; (b) 20% of the gross profit generated by the Company in the past and 9% of the gross profit produced and that will be produced by the Company; (c) 20% of the gross profit generated by the Company in the past and the relative share of the former Objet entity of the Company in the total gross profit produced and that will be produced by the Company; or (d) 20% of the value of the service inventions at issue. The former employee further sought an order of accounts. The Company rejects the claims that serve as a basis for the proceeding and is defending against them vigorously. While the Company does not believe that the reasonably possible losses from this proceeding will be material to the Company's financial statements, those losses (if any) cannot be estimated at the current time.

The Company is a party to various other legal proceedings, the outcome of which, in the opinion of management, will not have a significant adverse effect on the financial position, profitability or cash flows of the Company.

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