Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
Overview of Business and Trend Information
COVID Impact
As in preceding quarters, our results of operations for the three and six month periods ended June 30, 2021 should be evaluated in light of the ongoing global COVID-19 pandemic, which has disrupted businesses on a global scale. Our revenues in the second quarter of 2021 furthered the positive trend begun in the first quarter of the year, reflecting growth both on a year-over-year basis and on a sequential quarterly basis. The six-month results evidence these improvements on an aggregate basis, with an increase in revenues by 12.2% compared to the corresponding six month period of 2020, when the COVID-19 pandemic adversely impacted our revenues significantly. Our improved performance in the second quarter of 2021 was primarily driven by a 39.1 % increase in Consumables revenues and by a 32% increase in system revenues.
Summary of Financial Results
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. In the opinion of our management, all adjustments considered necessary for a fair statement of the unaudited condensed consolidated financial statements have been included herein and are of a normal recurring nature. The following discussion compares the actual results, on a GAAP basis, for the three and six months ended June 30, 2021 with the corresponding periods of 2020.
Results of Operations
Comparison of Three Months Ended June 30, 2021 to Three Months Ended June 30, 2020
The following table sets forth certain statement of operations data for the periods indicated:
Three Months Ended June 30, | |||||||||||||||
2021 | 2020 | ||||||||||||||
U.S. $ in thousands | % of Revenues | U.S. $ in thousands | % of Revenues | ||||||||||||
Revenues | $ | 147,005 | 100.0 | % | $ | 117,623 | 100.0 | % | |||||||
Cost of revenues | 83,735 | 57.0 | % | 73,887 | 62.8 | % | |||||||||
Gross profit | 63,270 | 43.0 | % | 43,736 | 37.2 | % | |||||||||
Research and development, net | 22,437 | 15.3 | % | 21,303 | 18.1 | % | |||||||||
Selling, general and administrative | 63,557 | 43.2 | % | 51,711 | 44.0 | % | |||||||||
Operating loss | (22,724 | ) | (15.5 | )% | (29,278 | ) | (24.9 | )% | |||||||
Financial income (expenses), net | (372 | ) | (0.3 | )% | 149 | 0.1 | % | ||||||||
Loss before income taxes | (23,096 | ) | (15.7 | )% | (29,129 | ) | (24.8 | )% | |||||||
Income tax benefit | (4,368 | ) | (3.0 | )% | (2,128 | ) | (1.8 | )% | |||||||
Share in losses of associated companies | (1,431 | ) | (1.0 | )% | (950 | ) | (0.8 | )% | |||||||
Net income attributable to non-controlling interests | - | 0.0 | % | 35 | 0.0 | % | |||||||||
Net loss attributable to Stratasys Ltd. | (20,159 | ) | (13.7 | )% | (27,986 | ) | (23.8 | )% |
Discussion of Results of Operations
Revenues
Our products and services revenues in the three months ended June 30, 2021 and 2020, as well as the percentage change reflected thereby, were as follows:
Three Months Ended June 30, | |||||||||||||||
2021 | 2020 | % Change | |||||||||||||
U.S. $ in thousands | |||||||||||||||
Products | $ | 100,305 | $ | 73,877 | 35.8 | % | |||||||||
Services | 46,700 | 43,746 | 6.8 | % | |||||||||||
$ | 147,005 | $ | 117,623 | 25.0 | % |
Products Revenues
Revenues derived from products (including AM systems and consumable materials) increased by $26.4 million, or 35.8%, for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020.
System revenues for the three months ended June 30, 2021 increased by 32.0% as compared to the three months ended June 30, 2020. Consumables revenues for the three months ended June 30, 2021 increased by 39.1% as compared to the three months ended June 30, 2020.
Services Revenues
Services revenues (including SDM, maintenance contracts, time and materials and other services) increased by $3 million for the three months ended June 30, 2021, or 6.8%, as compared to the three months ended June 30, 2020. Within services revenues, customer support revenue, which includes revenue generated mainly by maintenance contracts on our systems, increased by 10.0%.
Revenues by Region
Revenues and the percentage of revenues by region for the three months ended June 30, 2021 and 2020, as well as the percentage change in revenues in each such region reflected thereby, were as follows:
Three Months Ended June 30, | ||||||||||||||||||||
2021 | 2020 | % Change | ||||||||||||||||||
U.S.$ in thousands | % of Revenues | U.S.$ in thousands | % of Revenues | |||||||||||||||||
Americas* | $ | 92,949 | 63.2 | % | $ | 78,701 | 66.9 | % | 18.1 | % | ||||||||||
EMEA | 32,523 | 22.1 | % | 20,915 | 17.8 | % | 55.5 | % | ||||||||||||
Asia Pacific | 21,533 | 14.6 | % | 18,007 | 15.3 | % | 19.6 | % | ||||||||||||
$ | 147,005 | 100.0 | % | $ | 117,623 | 100.0 | % | 25.0 | % |
* Represent the United States, Canada and Latin America
Revenues in the Americas region increased by $14.2 million, or 18.1%, to $92.9 million for the three months ended June 30, 2021, compared to $78.7 million for the three months ended June 30, 2020. The increase reflects recovery from COVID-19 for both product revenue and service revenue.
Revenues in the EMEA region increased by $11.6 million, or 55.5%, to $32.5 million for the three months ended June 30, 2021, compared to $20.9 million for the three months ended June 30, 2020. The increase reflects recovery from COVID-19 for both Product and Service revenue as well as revenue from the RPS acquisition in early 2021. On a constant currency basis when using prior period’s exchange rates, revenues increased by $8.9 million, or 42.6%.
Revenues in the Asia Pacific region increased by $3.5 million, or 19.6%, to $21.5 million for the three months ended June 30, 2021, compared to $18 million for the three months ended June 30, 2020. The increase was primarily driven by higher products revenues and reflects recovery from COVID-19.
Gross Profit
Gross profit from our products and services, as well as the percentage change reflected thereby, was as follows:
Three Months Ended June 30, | ||||||||||||
2021 | 2020 | |||||||||||
U.S. $ in thousands | Change in % | |||||||||||
Gross profit attributable to: | ||||||||||||
Products | $ | 50,574 | $ | 33,908 | 49.2 | % | ||||||
Services | 12,696 | 9,828 | 29.2 | % | ||||||||
$ | 63,270 | $ | 43,736 | 44.7 | % |
Gross profit as a percentage of revenues from our products and services was as follows:
Three Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Gross profit as a percentage of revenues from: | ||||||||
Products | 50.4 | % | 45.9 | % | ||||
Services | 27.2 | % | 22.5 | % | ||||
Total gross profit | 43.0 | % | 37.2 | % |
Gross profit attributable to products revenues increased by $16.7 million, or 49.2%, to $50.6 million for the three months ended June 30, 2021, compared to gross profit of $33.9 million for the three months ended June 30, 2020. Gross profit attributable to products revenues as a percentage of products revenues increased to 50.4% for the three months ended June 30, 2021, compared to 45.9% for the three months ended June 30, 2020. Our gross profit from products revenues was favorably impacted by the mix of revenue sources driven by an increase of hardware and consumables, partially offset by increased global cost pressures that included both logistics and raw materials and ramp-up production costs for new product introductions.
Gross profit attributable to services revenues increased by $2.9 million, or 29.2%, to $12.7 million for the three months ended June 30, 2021, compared to $9.8 million for the three months ended June 30, 2020. Gross profit attributable to services revenues as a percentage of services revenues in the three months ended June 30, 2021 increased to 27.2%, as compared to 22.5% for the three months ended June 30, 2020, reflecting recovery from COVID-19.
Operating Expenses
The amount of each type of operating expense for the three months ended June 30, 2021 and 2020, as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such quarter, were as follows:
Three Months Ended June 30, | ||||||||||||
2021 | 2020 | % Change | ||||||||||
U.S. $ in thousands | ||||||||||||
Research and development, net | $ | 22,437 | $ | 21,303 | 5.3 | % | ||||||
Selling, general & administrative | 63,557 | 51,711 | 22.9 | % | ||||||||
$ | 85,994 | $ | 73,014 | 17.8 | % | |||||||
Percentage of revenues | 58.5 | % | 62.1 | % |
Research and development expenses, net increased by $1.1 million, or 5.3%, to $22.4 million for the three months ended June 30, 2021, compared to $21.3 million for the three months ended June 30, 2020. The amount of research and development expenses constituted 15.3% of our revenues for the three months ended June 30, 2021, as compared to 18.1% for the three months ended June 30, 2020.
Our research and development expenses were impacted by the timing of project spending and product launches, based on our portfolio management. We continue to invest in strategic long-term initiatives that include advancements in our core FDM and PolyJet technologies and in our new photopolymer-based P3 technology, advanced composite materials, software and development of new applications which will enhance our current solutions offerings.
Selling, general and administrative expenses increased by $11.8 million, or 22.9%, to $63.6 million for the three months ended June 30, 2021, compared to $51.7 million for the three months ended June 30, 2020, driven by the increase in operating activities and a loss of $2.9 million for revaluation of an equity investment in the second quarter of 2021.
Operating Loss
Operating loss and operating loss as a percentage of our total revenues were as follows:
Three Months Ended June 30, | |||||||||
2021 | 2020 | ||||||||
U.S. $ in thousands | |||||||||
Operating loss | $ | (22,724 | ) | $ | (29,278 | ) | |||
Percentage of revenues | (15.5 | )% | (24.9 | )% |
Operating loss amounted to $22.7 million for the three months ended June 30, 2021, compared to an operating loss of $29.3 million for the three months ended June 30, 2020. The decrease in operating loss was primarily attributable to the significant increase in gross profit for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, partly offset by increased operating expenses, as discussed above.
Financial Income (Expenses), net
Financial expenses, net, which was primarily comprised of foreign currencies effects, interest income and interest expenses, was $0.4 million for the three months ended June 30, 2021, compared to financial income, net of $0.1 million for the three months ended June 30, 2020.
Income Taxes
Income taxes and income taxes as a percentage of net loss before taxes, as well as the percentage change in each, year over year, reflected thereby, were as follows:
Three Months Ended June 30, | |||||||||||||
2021 | 2020 | ||||||||||||
U.S. $ in thousands | Change in % | ||||||||||||
Income tax benefit | $ | (4,368 | ) | $ | (2,128 | ) | 105.3 | % | |||||
As a percent of loss before income taxes | 18.9 | % | 7.3 | % | 158.9 | % |
We had an effective tax rate of 18.9% for the three-month period ended June 30, 2021, compared to an effective tax rate of 7.3% for the three-month period ended June 30, 2020. Our effective tax rate was primarily impacted by the move to the new Israeli tax regime of “Preferred Technology Enterprise” subject to 12% tax rate as well as different geographic mixes of earnings and losses, and valuation allowance on losses of our US subsidiaries.
Share in Losses of Associated Companies
Share in losses of associated companies reflects our proportionate share of the losses of unconsolidated entities accounted for by using the equity method of accounting. During the three months ended June 30, 2021, the loss from our proportionate share of the losses of our equity method investments was $1.4 million, compared to a loss of $1.0 million in the three months ended June 30, 2020.
Net Loss Attributable to Stratasys Ltd. and Net Loss Per Share
Net loss attributable to Stratasys Ltd., and net loss per share were as follows:
Three Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
U.S. $ in thousands | ||||||||
Net loss attributable to Stratasys Ltd. | $ | (20,159 | ) | $ | (27,986 | ) | ||
Percentage of revenues | (13.7 | )% | (23.8 | )% | ||||
Diluted net loss per share | $ | (0.31 | ) | $ | (0.51 | ) |
Net loss attributable to Stratasys Ltd. was $20.2 million for the three months ended June 30, 2021 compared to net loss of $28 million for the three months ended June 30, 2020. The decrease in the net loss attributable to Stratasys Ltd. was primarily attributable to the higher gross profit, as well as cost-mitigation measures, which reduced operating expenses as a percentage of revenues, as described above.
Net loss per share was $0.31 for the three months ended June 30, 2021 as compared to net loss per share of $0.51 for the three months ended June 30, 2020. The weighted average fully diluted share count was 64.9 million during the three months ended June 30, 2021, compared to 54.9 million during the three months ended June 30, 2020, which increase reflected the issuance of shares in our follow-on offering that was consummated in march 2021.
Results of Operations
Comparison of Six Months Ended June 30,2021, to Six Months Ended June 30, 2020
The following table sets forth certain statement of operations data for the periods indicated:
Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | ||||||||||||||
U.S. $ in thousands | % of Revenues | U.S. $ in thousands | % of Revenues | ||||||||||||
Revenues | $ | 281,194 | 100.0 | % | $ | 250,530 | 100.0 | % | |||||||
Cost of revenues | 162,347 | 57.7 | % | 146,924 | 58.6 | % | |||||||||
Gross profit | 118,847 | 42.3 | % | 103,606 | 41.4 | % | |||||||||
Research and development, net | 43,038 | 15.3 | % | 45,497 | 18.2 | % | |||||||||
Selling, general and administrative | 116,891 | 41.6 | % | 107,287 | 42.8 | % | |||||||||
Operating loss | (41,082 | ) | (14.6 | )% | (49,178 | ) | (19.6 | )% | |||||||
Financial expenses, net | (749 | ) | (0.3 | )% | (680 | ) | (0.3 | )% | |||||||
Loss before income taxes | (41,831 | ) | (14.9 | )% | (49,858 | ) | (19.9 | )% | |||||||
Income tax benefit | (5,310 | ) | (1.9 | )% | (1,907 | ) | (0.8 | )% | |||||||
Share in losses of associated companies | (2,549 | ) | (0.9 | )% | (1,788 | ) | (0.7 | )% | |||||||
Net loss attributable to non-controlling interests | - | 0 | (50 | ) | 0.0 | ||||||||||
Net loss attributable to Stratasys Ltd. | (39,070 | ) | (13.9 | )% | (49,689 | ) | (19.8 | )% |
Discussion of Results of Operations
Revenues
Our products and services revenues in the six months ended June 30, 2021 and 2020, as well as the percentage change reflected thereby, were as follows:
Six Months Ended June 30, | ||||||||||||
2021 | 2020 | % Change | ||||||||||
U.S. $ in thousands | ||||||||||||
Products | $ | 190,629 | $ | 157,049 | 21.4 | % | ||||||
Services | 90,565 | 93,481 | (3.1 | )% | ||||||||
$ | 281,194 | $ | 250,530 | 12.2 | % |
Products Revenues
Revenues derived from products (including AM systems and consumable materials) increased by $33.6 million, or 21.4%, for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020.
Systems revenues for the six months ended June 30, 2021 increased by 36.0% as compared to the six months ended June 30, 2020. Consumables revenues for the six months ended June 30, 2021 increased by 11.7%% as compared to the six months ended June 30, 2020.
The increase reflects recovery from COVID-19 for products revenue as well as revenue from the RPS acquisition in early 2021.
Services Revenues
Services revenues (including SDM, maintenance contracts, time and materials and other services) decreased by $2.9 million for the six months ended June 30, 2021, or 3.1%, as compared to the six months ended June 30, 2020.
Revenues by Region
Revenues and the percentage of revenues by region for the six months ended June 30, 2021 and 2020, as well as the percentage change in revenues in each such region reflected thereby, were as follows:
Six Months Ended June 30, | ||||||||||||||||||||
2021 | 2020 | % Change | ||||||||||||||||||
U.S.$ in thousands | % of Revenues | U.S.$ in thousands | % of Revenues | |||||||||||||||||
Americas* | $ | 175,062 | 62.3 | % | $ | 165,274 | 66.0 | % | 5.9 | % | ||||||||||
EMEA | 61,441 | 21.8 | % | 47,835 | 19.1 | % | 28.4 | % | ||||||||||||
Asia Pacific | 44,691 | 15.9 | % | 37,421 | 14.9 | % | 19.4 | % | ||||||||||||
$ | 281,194 | 100.0 | % | $ | 250,530 | 100.0 | % | 12.2 | % |
* Consists of United States, Canada and Latin America
Revenues in the Americas region increased by $9.8 million, or 5.9%, to $175 million for the six months ended June 30, 2021, compared to $165.3 million for the six months ended June 30, 2020.
Revenues in the EMEA region increased by $13.6 million, or 28.4%, to $61.4 million for the six months ended June 30, 2021, compared to $47.8 million for the six months ended June 30, 2020.
Revenues in the Asia Pacific region increased by $7.3 million, or 19.4%, to $44.7 million for the six months ended June 30, 2021, compared to $37.4 million for the six months ended June 30, 2020.
Gross Profit
Gross profit from our products and services, as well as the percentage change reflected thereby, were as follows:
Six Months Ended June 30, | ||||||||||||
2021 | 2020 | |||||||||||
U.S. $ in thousands | Change in % | |||||||||||
Gross profit attributable to: | ||||||||||||
Products | $ | 93,978 | $ | 77,832 | 20.7 | % | ||||||
Services | 24,869 | 25,774 | (3.5 | ) % | ||||||||
$ | 118,847 | $ | 103,606 | 14.7 | % |
Gross profit as a percentage of revenues from our products and services was as follows:
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Gross profit as a percentage of revenues from: | ||||||||
Products | 49.3 | % | 49.6 | % | ||||
Services | 27.5 | % | 27.6 | % | ||||
Total gross profit | 42.3 | % | 41.4 | % |
Gross profit attributable to products revenues increased by $16.1 million, or 20.7%, to $94.0 million for the six months ended June 30, 2021, compared to gross profit of $77.8 million for the six months ended June 30, 2020. Gross profit attributable to products revenues as a percentage of products revenues decreased to 49.3% for the six months ended June 30, 2021, compared to 49.6% for the six months ended June 30, 2020.
Gross profit attributable to services revenues decreased by $0.9 million, or 3.5%, to $24.9 million for the six months ended June 30, 2021, compared to $25.8 million for the six months ended June 30, 2020. Gross profit attributable to services revenues as a percentage of services revenues in the six months ended June 30, 2021 decreased to 27.5%, as compared to 27.6% for the six months ended June 30, 2020.
Operating Expenses
The amount of each type of operating expense for the six months ended June 30, 2021 and 2020 as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such quarter, were as follows:
Six Months Ended June 30, | ||||||||||||
2021 | 2020 | % Change | ||||||||||
U.S. $ in thousands | ||||||||||||
Research and development, net | $ | 43,038 | $ | 45,497 | (5.4 | )% | ||||||
Selling, general and administrative | 116,891 | 107,287 | 9.0 | % | ||||||||
$ | 159,929 | $ | 152,784 | 4.7 | % | |||||||
Percentage of revenues | 56.9 | % | 61.0 | % |
Research and development expenses, net decreased by $2.5 million, or 5.4%, to $43.0 million for the six months ended June 30, 2021, compared to $45.5 million for the six months ended June 30, 2020. The amount of research and development expenses constituted 15.3% of our revenues for the six months ended June 30, 2021, as compared to 18.2% for the six months ended June 30, 2020.
Selling, general and administrative expenses increased by $9.6 million, or 9.0%, to $116.9 million for the six months ended June 30, 2021, compared to $107.3 million for the six months ended June 30, 2020. The amount of selling, general and administrative expenses constituted 41.6% of our revenues for the six months ended June 30, 2021, as compared to 42.8% for the six months ended June 30, 2020.
Operating Loss
Operating loss and operating loss as a percentage of our total revenues were as follows:
Six Months Ended June 30, | |||||||||
2021 | 2020 | ||||||||
U.S. $ in thousands | |||||||||
Operating loss | $ | (41,082 | ) | $ | (49,178 | ) | |||
Percentage of revenues | (14.6 | )% | (19.6 | )% |
Operating loss amounted to $41.1 million for the six months ended June 30, 2021, compared to an operating loss of $49.2 million for the six months ended June 30, 2020.
Financial Expenses, net
Financial expenses, net, which were primarily comprised of foreign currencies effects, interest income and interest expenses, were $0.7 million for the six months ended June 30, 2021 and 2020.
Income Taxes
Income taxes and income taxes as a percentage of net loss before taxes, as well as the percentage change in each, year over year, reflected thereby, were as follows:
Six Months Ended June 30, | |||||||||||||
2021 | 2020 | ||||||||||||
U.S. $ in thousands | Change in % | ||||||||||||
Income tax benefit | $ | (5,310 | ) | $ | (1,907 | ) | 178.4 | % | |||||
As a percent of loss before income taxes | 12.7 | % | 3.8 | % | 234.2 | % |
We had an effective tax rate of 12.7% for the six-month period ended June 30, 2021, compared to an effective tax rate of 3.8% for the six-month period ended June 30, 2020.
Our effective tax rate was primarily impacted by the move to the new Israeli tax regime of “Preferred Technology Enterprise” subject to 12% tax rate as well as different geographic mixes of earnings and losses, and valuation allowance on losses of our US subsidiaries.
Share in Losses of Associated Companies
Share in losses of associated companies reflects our proportionate share of the earnings of unconsolidated entities accounted for by using the equity method of accounting. During the six months ended June 30, 2021, the loss from our proportionate share of the earnings of our equity method investments was $2.5 million, compared to a loss of $1.8 million in the six months ended June 30, 2020.
Net Loss Attributable to Stratasys Ltd. and Net Loss Per Share
Net loss attributable to Stratasys Ltd., and net loss per share were as follows:
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
U.S. $ in thousands | ||||||||
Net loss attributable to Stratasys Ltd. | $ | (39,070 | ) | $ | (49,689 | ) | ||
Percentage of revenues | (13.9 | )% | (19.8 | )% | ||||
Diluted net loss per share | $ | (0.63 | ) | $ | (0.91 | ) |
Net loss attributable to Stratasys Ltd. was $39.1 million for the six months ended June 30, 2021 compared to a net loss of $49.7 million for the six months ended June 30, 2020.
Net loss per share was $0.63 and $0.91 for the six months ended June 30, 2021 and 2020, respectively. The weighted average fully diluted share count was 61.8 million for the six months ended June 30, 2021, compared to 54.7 million for the six months ended June 30, 2020, which increase reflected the issuance of shares in our follow-on offering that was consummated in March 2021.
The following non-GAAP data, which excludes certain items as described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures are useful information for investors and shareholders of our company in gauging our results of operations (i) on an ongoing basis after excluding mergers, acquisitions and divestments related expense or gains and restructuring-related charges or gains, and (ii) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets and goodwill, revaluation of our investments and the corresponding tax effect of those items. These non-GAAP adjustments either do not reflect actual cash outlays that impact our liquidity and our financial condition or have a non-recurring impact on the statement of operations, as assessed by management. These non-GAAP financial measures are presented to permit investors to more fully understand how management assesses our performance for internal planning and forecasting purposes. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all items indicated above during a period, which may not provide a comparable view of our performance to other companies in our industry. Investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with GAAP. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table below.
Reconciliation of GAAP to Non-GAAP Results of Operations
The following tables present the GAAP measures, the corresponding non-GAAP amounts and the related non-GAAP adjustments for the applicable periods:
Three Months Ended June 30, | ||||||||||||||||||||||||
2021 | Non-GAAP | 2021 | 2020 | Non-GAAP | 2020 | |||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
U.S. dollars and shares in thousands (except per share amounts) | ||||||||||||||||||||||||
Gross profit (1) | $63,270 | $6,616 | $69,886 | $43,736 | $9,612 | $53,348 | ||||||||||||||||||
Operating income (loss) (1,2) | (22,724 | ) | 20,133 | (2,591 | ) | (29,278 | ) | 21,228 | (8,050 | ) | ||||||||||||||
Net income (loss) attributable to Stratasys Ltd. (1,2,3) | (20,159 | ) | 18,581 | (1,578 | ) | (27,986 | ) | 20,634 | (7,352 | ) | ||||||||||||||
Net income (loss) per diluted share attributable to Stratasys Ltd. (4) | $ | (0.31 | ) | $ | 0.29 | $ | (0.02 | ) | $ | (0.51 | ) | $ | 0.38 | $ | (0.13 | ) | ||||||||
(1) | Acquired intangible assets amortization expense | 5,518 | 4,065 | |||||||||||||||||||||
Non-cash stock-based compensation expense | 788 | 497 | ||||||||||||||||||||||
Restructuring and other related costs | 310 | 5,050 | ||||||||||||||||||||||
6,616 | 9,612 | |||||||||||||||||||||||
(2) | Acquired intangible assets amortization expense | 2,200 | 2,125 | |||||||||||||||||||||
Non-cash stock-based compensation expense | 7,189 | 5,614 | ||||||||||||||||||||||
Restructuring and other related costs | 350 | 3,798 | ||||||||||||||||||||||
Revaluation of investments | 2,201 | - | ||||||||||||||||||||||
Contingent consideration | 202 | - | ||||||||||||||||||||||
Other expenses | 1,375 | 79 | ||||||||||||||||||||||
13,517 | 11,616 | |||||||||||||||||||||||
20,133 | 21,228 | |||||||||||||||||||||||
(3) | Corresponding tax effect | (1,637 | ) | (669 | ) | |||||||||||||||||||
Equity method related amortization, divestments and impairments | 85 | 75 | ||||||||||||||||||||||
$ | 18,581 | $ | 20,634 | |||||||||||||||||||||
(4) | Weighted average number of ordinary shares outstanding- Diluted | 64,908 | 64,908 | 54,917 | 54,917 |
Six Months Ended June 30, | ||||||||||||||||||||||||
2021 | Non-GAAP | 2021 | 2020 | Non-GAAP | 2020 | |||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
U.S. dollars and shares in thousands (except per share amounts) | ||||||||||||||||||||||||
Gross profit (1) | $ | 118,847 | $ | 13,685 | $ | 132,532 | $ | 103,606 | $ | 14,026 | $ | 117,632 | ||||||||||||
Operating income (loss) (1,2) | (41,082 | ) | 35,918 | (5,164 | ) | (49,178 | ) | 32,719 | (16,459 | ) | ||||||||||||||
Net income (loss) attributable to Stratasys Ltd. (1,2,3) | (39,070 | ) | 33,692 | (5,378 | ) | (49,689 | ) | 31,771 | (17,919 | ) | ||||||||||||||
Net income (loss) per diluted share attributable to Stratasys Ltd. (4) | $ | (0.63 | ) | $ | 0.55 | $ | (0.09 | ) | $ | (0.91 | ) | $ | 0.58 | $ | (0.33 | ) | ||||||||
(1) | Acquired intangible assets amortization expense | 10,873 | 8,130 | |||||||||||||||||||||
Non-cash stock-based compensation expense | 1,422 | 899 | ||||||||||||||||||||||
Restructuring and other related costs | 1,390 | 4,997 | ||||||||||||||||||||||
13,685 | 14,026 | |||||||||||||||||||||||
(2) | Acquired intangible assets amortization expense | 4,393 | 4,267 | |||||||||||||||||||||
Non-cash stock-based compensation expense | 13,760 | 10,119 | ||||||||||||||||||||||
Restructuring and other related costs | 2,159 | 3,829 | ||||||||||||||||||||||
Revaluation of investments | (1,469 | ) | - | |||||||||||||||||||||
Contingent consideration | 393 | - | ||||||||||||||||||||||
Other expenses | 2,997 | 478 | ||||||||||||||||||||||
22,233 | 18,693 | |||||||||||||||||||||||
35,918 | 32,719 | |||||||||||||||||||||||
(3) | Corresponding tax effect | (2,394 | ) | (1,100 | ) | |||||||||||||||||||
Equity method related amortization, divestments and impairments | 168 | 152 | ||||||||||||||||||||||
$ | 33,692 | $ | 31,771 | |||||||||||||||||||||
(4) | Weighted average number of ordinary shares outstanding- Diluted | 61,796 | 61,796 | 54,733 | 54,733 |
Liquidity and Capital Resources
A summary of our statements of cash flows is as follows:
Six Months Ended June 30, | |||||||
2021 | 2020 | ||||||
U.S $ in thousands | |||||||
Net loss | $ | (39,070 | ) | $ | (49,739 | ) | |
Depreciation and amortization | 27,695 | 25,104 | |||||
Deferred income taxes | (7,524 | ) | (26 | ) | |||
Stock-based compensation | 15,182 | 11,018 | |||||
Other non-cash items, net | 5,543 | 3,179 | |||||
Change in working capital and other items | 26,560 | 11,986 | |||||
Net cash provided by operating activities | 28,386 | 1,522 | |||||
Net cash used in investing activities | (177,676 | ) | (9,437 | ) | |||
Net cash provided by financing activities | 222,796 | 53 | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,869 | ) | (880 | ) | |||
Net change in cash, cash equivalents and restricted cash | 71,637 | (8,742 | ) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 272,216 | 293,597 | |||||
Cash, cash equivalents and restricted cash, end of period | 343,853 | 284,855 |
Our cash, cash equivalents and restricted cash balance increased to $343.9 million as of June 30, 2021 from $272.2 million as of December 31, 2020. The increase in cash, cash equivalents and restricted cash in the six months ended June 30, 2021 was primarily due to the public offering of shares in a net amount of $218.9 million that we completed in March 2021, partially offset by investing activities.
Cash flows from operating activities
We generated $28.4 million of cash from operating activities during the six months ended June 30, 2021. That cash generation reflects our $39.1 million net loss, as adjusted to eliminate non-cash charges included in net loss, including $27.7 million of depreciation and amortization and $15.2 million of stock-based compensation expenses. Favorable changes in our working capital balances were mainly driven by a decrease in our inventory balances and an increase in our accounts payable balance.
Cash flows from investing activities
We used $177.7 million of cash in our investing activities during the six months ended June 30, 2021. Cash was primarily used to invest $11.9 million to purchase property, equipment and intangibles and $152.0 million net investment in short-term bank deposits. Our principal property and equipment purchases were for our new buildings complex under construction in Rehovot, Israel. The new facility in Rehovot, Israel, which will contain two buildings, houses our Israeli headquarters, research and development facilities and certain marketing activities. In addition, we used $6.7 million of cash for acquisitions, net of cash acquired.
Cash flows from financing activities
We generated $222.8 million of cash from financing activities during the six months ended June 30, 2021. Our follow-on public offering of shares generated proceeds, net of issuance costs of $218.9 million, and we generated an additional $3.5 million of proceeds from exercise of stock options.
Capital resources and capital expenditures
Our total current assets amounted to $785.4 million as of June 30, 2021, of which $522.7 million consisted of cash, cash equivalents, short-term deposits and restricted cash. Total current liabilities amounted to $158.6 million. Most of our cash and cash equivalents are held in banks in Israel and the U.S.
The credit risk related to our accounts receivable is limited due to the relatively large number of customers and their wide geographic distribution. In addition, we seek to reduce the credit exposure related to our accounts receivable by imposing credit limits, conducting ongoing credit evaluation, and by implementing account monitoring procedures, as well as credit insurance for many of our customers.
We believe that we will have adequate cash and cash equivalents to fund our ongoing operations and that these sources of liquidity will be sufficient to satisfy our capital expenditure and working capital needs for the next twelve months.
Critical Accounting Policies
We have prepared our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America. This has required us to make estimates, judgments, and assumptions that affected the amounts we reported. Actual results may differ from those estimates. To facilitate the understanding of our business activities, certain accounting policies that are important to the presentation of our financial condition and results of operations and that require management’s subjective judgments are described in our 2020 Annual Report. We base our judgments on our experience and various assumptions that we believe to be reasonable under the circumstances.
Forward-Looking Statements and Factors That May Affect Future Results of Operations
Certain information included in or incorporated by reference into the Report of Foreign Private Issuer on Form 6-K to which this Operating and Financial Review is appended, or the Form 6-K, may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “may,” “will,” “could,” “should,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words.
These forward-looking statements may include, but are not limited to, statements regarding our future strategy, future operations, projected financial position, proposed products, estimated future revenues, projected costs, future prospects, the future of our industry and results that might be obtained by pursuing management’s current plans and objectives.
You should not place undue reliance on our forward-looking statements because the matters they describe are subject to certain risks, uncertainties and assumptions that are difficult to predict. Our forward-looking statements are based on the information currently available to us and speak only as of the date of the Form 6-K. Over time, our actual results, performance or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our shareholders. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:
•
the extent of our success at introducing new or improved products and solutions that gain market share;
•
the extent of growth of the 3D printing market generally;
•
the duration and severity of the global COVID-19 pandemic, and the strength of recovery from it, which may continue to have significant consequences for our operations, financial position, cash flows, and those of our customers and suppliers;
•
changes in our overall strategy, including as related to any restructuring activities and our capital expenditures;
•
the impact of shifts in prices or margins of the products that we sell or services we provide;
•
the impact of competition and new technologies;
•
impairments of goodwill or other intangible assets in respect of companies that we acquire;
•
the extent of our success at efficiently and successfully integrating the operations of various companies that we have acquired or may acquire;
•
global market, political and economic conditions, and in the countries in which we operate in particular;
•
government regulations and approvals;
•
litigation and regulatory proceedings;
•
infringement of our intellectual property rights by others (including for replication and sale of consumables for use in our systems), or infringement of others’ intellectual property rights by us;
• the extent of our success at maintaining our liquidity and financing our operations and capital needs;
•
impact of tax regulations on our results of operations and financial conditions; and
•
those factors referred to in Item 3.D, “Key Information - Risk Factors”, Item 4, “Information on the Company”, and Item 5, “Operating and Financial Review and Prospects” in our 2020 Annual Report, as supplemented herein, as well as in other portions of the 2020 Annual Report
Readers are urged to carefully review and consider the various disclosures made throughout the Form 6-K, our 2020 Annual Report, and in our other reports filed with or furnished to the SEC, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Reference is made to Item 11, “Quantitative and Qualitative Disclosures about Market Risk” in our 2020 Annual Report.
LEGAL PROCEEDINGS
We are subject to various litigation and other legal proceedings from time to time. For a discussion of our litigation status, see Note 12-“Contingencies” in the notes to our unaudited condensed consolidated interim financial statements attached as Exhibit 99.1 to the Form 6-K.
RISK FACTORS