Business Wire | Aug 5, 2020 07:30AM EDT

Stratasys Releases Second Quarter 2020 Financial Results

Aug. 05, 2020

MINNEAPOLIS & REHOVOT, Israel--(BUSINESS WIRE)--Aug. 05, 2020--Stratasys Ltd. (NASDAQ: SSYS) announced financial results for the second quarter of 2020.

Q2 2020 Financial Results Summary:

Revenue for the second quarter of 2020 was $117.6 million, compared to $163.2 million for the same period last year. The 27.9% reduction was primarily driven by the adverse impact of COVID-19 on the company's customers throughout the industries into which the company sells its products and services.

* GAAP gross margin was 37.2% for the quarter, compared to 49.7% for the same period last year. * Non-GAAP gross margin was 45.4% for the quarter, compared to 52.5% for the same period last year. Gross margin decline is primarily due to the lower proportion of consumables out of the total revenue mix due to the COVID-19 crisis, not to discounting or material ASP reductions. The company strongly believes that gross margins will recover as our customers return to their pre-COVID utilization levels. * GAAP operating loss for the quarter was $29.3 million, compared to operating income of $0.8 million for the same period last year. * Non-GAAP operating loss for the quarter was $8.1 million, compared to non-GAAP operating income of $9.1 million for the same period last year. * Non-GAAP EBITDA was ($1.6) million for the quarter, compared to $15.5 million for the same period last year. * GAAP net loss for the quarter was $28.0 million, or ($0.51) per diluted share, compared to net income of $1.2 million, or $0.02 per diluted share, for the same period last year. * Non-GAAP net loss for the quarter was $7.4 million, or ($0.13) per diluted share, compared to non-GAAP net income of $8.5 million, or $0.16 per diluted share, for the same period last year. * The Company used $9.7 million of cash from operations during the second quarter and ended the period with $313.0 million in cash, cash equivalents and short-term deposits. The Company has no debt.

"3D Printing continues to penetrate further into manufacturing across every relevant business sector," stated Yoav Zeif, CEO of Stratasys. "Despite the current macro slowdown due to COVID-19, we remain very optimistic about where our business and our industry is headed. The largest opportunity for us in 3D Printing is in Polymers, and the fastest-growing area is manufacturing. We are already a leader in Polymer additive manufacturing and expect to increase our presence through new offerings that will focus on delivering incremental customer value, especially in the fast-growing manufacturing applications, where we see the longest runway for growth through new technologies that we will offer," continued Zeif. "We have the ecosystem, resources and strategy to further expand our leadership as we enhance and broaden our technology offerings to serve significantly more Polymer applications and offer a full suite of solutions. We believe that these efforts will reboot growth in the short to medium-term, provide us with access to a greater customer share of wallet, and leverage our core competencies to more than double our addressable market, driving our future profitable growth."

Stratasys Ltd. Q2 2020 Conference Call Details

The Company plans to hold the conference call to discuss its second quarter 2020 financial results on Wednesday, August 5, 2020 at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the Stratasys Website at investors.stratasys.com, or directly at the following web address:

https://78449.themediaframe.com/dataconf/productusers/ssys/mediaframe/39720/indexl.html

To participate by telephone, the U.S. toll-free number is 877-407-0619 and the international dial-in is +1-412-902-1012. Investors are advised to dial into the call at least ten minutes prior to the call to register. The webcast will be available for 6 months at investors.stratasys.com, or by accessing the above-provided web address.

Stratasys (Nasdaq: SSYS) is a global leader in additive manufacturing or 3D printing technology and is the manufacturer of FDM(r), PolyJet(tm), and stereolithography 3D printers. The company's technologies are used to create prototypes, manufacturing tools, and production parts for industries, including aerospace, automotive, healthcare, consumer products and education. For more than 30 years, Stratasys products have helped manufacturers reduce product-development time, cost, and time-to-market, as well as reduce or eliminate tooling costs and improve product quality. The Stratasys 3D printing ecosystem of solutions and expertise includes 3D printers, materials, software, expert services, and on-demand parts production.

To learn more about Stratasys, visit www.stratasys.com, the Stratasys blog, Twitter, LinkedIn, or Facebook. Stratasys reserves the right to utilize any of the foregoing social media platforms, including the company's websites, to share material, non-public information pursuant to the SEC's Regulation FD. To the extent necessary and mandated by applicable law, Stratasys will also include such information in its public disclosure filings.

Stratasys is a registered trademark and the Stratasys signet is a trademark of Stratasys Ltd. and/or its subsidiaries or affiliates. All other trademarks are the property of their respective owners.

Cautionary Statement Regarding Forward-Looking Statements

The statements in this press release regarding Stratasys' strategy, and the statements regarding its projected future financial performance, including the financial guidance (or withdrawal of guidance) concerning its expected results for 2020, are forward-looking statements reflecting management's current expectations and beliefs. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt change. Due to risks and uncertainties associated with Stratasys' business, actual results could differ materially from those projected or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: the degree of our success at introducing new or improved products and solutions that gain market share; the degree of growth of the 3D printing market generally; the duration of the global COVID-19 pandemic, which, if extensive, may continue to impact, in a material adverse manner, our operations, financial position and cash flows, and those of our customers and suppliers; the impact of potential shifts in the prices or margins of the products that we sell or services that we provide, including due to a shift towards lower-margin products or services; the impact of competition and new technologies; potential further charges against earnings that we could be required to take due to impairment of additional goodwill or other intangible assets; to the extent of our success at successfully consummating acquisitions or investments in new businesses, technologies, products or services; potential changes in our management and board of directors; global market, political and economic conditions, and in the countries in which we operate in particular (including risks related to the impact of coronavirus on our operations, supply chain, liquidity, cash flow and customer orders); costs and potential liability relating to litigation and regulatory proceedings; risks related to infringement of our intellectual property rights by others 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; the impact of tax regulations on our results of operations and financial condition; and those additional factors referred to in Item 3.D "Key Information - Risk Factors", Item 4, "Information on the Company", Item 5, "Operating and Financial Review and Prospects," and all other parts of our Annual Report on Form 20-F for the year ended December 31, 2019 (the "2019 Annual Report"), which we filed with the Securities and Exchange Commission (the "SEC") on February 26, 2020. Readers are urged to carefully review and consider the various disclosures made throughout our 2019 Annual Report and the Report of Foreign Private Issuer on Form 6-K that attaches Stratasys' unaudited, condensed consolidated financial statements and its review of its results of operations and financial condition, for the quarterly period ended June 30, 2020, which we are furnishing to the SEC on or about the date hereof, and 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. Any guidance provided, and other forward-looking statements made, in this press release are made as of the date hereof, and Stratasys undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Use of non-GAAP financial measures

The non-GAAP data included herein, 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 on an ongoing basis after (i) 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 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.

Stratasys Ltd.Consolidated Balance Sheets(Unaudited)(in thousands, except share data) June 30, December 31,

2020 2019

ASSETS Current assetsCash and cash equivalents $ 284,742 $ 293,484

Short-term deposits $ 28,300 $ 28,300

Accounts receivable, net 102,212 132,558

Inventories 164,588 168,504

Prepaid expenses 7,056 6,567

Other current assets 19,969 29,659

Total current assets 606,867 659,072

Non-current assetsProperty, plant and equipment, net 194,437 189,706

Goodwill 385,636 385,658

Other intangible assets, net 75,638 87,328

Operating lease right-of-use assets 17,738 20,936

Other non-current assets 33,744 38,819

Total non-current assets 707,193 722,447

Total assets $ 1,314,060 $ 1,381,519

LIABILITIES AND EQUITY Current liabilitiesAccounts payable $ 30,600 $ 35,818

Accrued expenses and other current liabilities 23,743 28,528

Accrued compensation and related benefits 29,548 34,013

Deferred revenues 48,617 52,268

Operating lease liabilities - short term 8,667 9,292

Total current liabilities 141,175 159,919

Non-current liabilitiesDeferred revenues - long-term 13,489 16,039

Operating lease liabilities - long term 9,493 12,445

Other non-current liabilities 31,576 35,343

Total non-current liabilities 54,558 63,827

Total liabilities 195,733 223,746

Redeemable non-controlling interests 572 622

EquityOrdinary shares, NIS 0.01 nominal value,authorized 180,000 thousandsshares; 55,030 thousands shares and 54,441thousands shares issuedand outstanding at June 30, 2020 and December 150 148 31, 2019, respectivelyAdditional paid-in capital 2,717,963 2,706,894

Accumulated other comprehensive loss (8,494 ) (7,716 )

Accumulated deficit (1,591,864 ) (1,542,175 )

Total equity 1,117,755 1,157,151

Total liabilities and equity $ 1,314,060 $ 1,381,519

Stratasys Ltd.Consolidated Statements of Operations(in thousands, except per share data) Three Months Ended June Six Months Ended June 30, 30,

2020 2019 2020 2019

(unaudited) (unaudited) (unaudited) (unaudited)

Net salesProducts $ 73,877 $ 110,341 $ 157,049 $ 215,432

Services 43,746 52,822 93,481 103,031

117,623 163,163 250,530 318,463

Cost of salesProducts 39,969 47,095 79,217 91,264

Services 33,918 34,901 67,707 69,575

73,887 81,996 146,924 160,839

Gross profit 43,736 81,167 103,606 157,624

Operating expensesResearch and 21,303 24,040 45,497 46,614 development, netSelling, general and 51,711 56,322 107,287 113,476 administrative 73,014 80,362 152,784 160,090

Operating (loss) income (29,278 ) 805 (49,178 ) (2,466 )

Financial income 149 1,754 (680 ) 2,508 (expense), net Income (loss) before (29,129 ) 2,559 (49,858 ) 42 income taxes Income tax (benefit) (2,128 ) 1,280 (1,907 ) 2,498 expenses Share in profits (950 ) (195 ) (1,788 ) 1,228 (losses) of associatedcompanies Net income (loss) (27,951 ) 1,084 (49,739 ) (1,228 )

Net income (loss)attributable to 35 (68 ) (50 ) (110 )non-controllinginterests Net income (loss) $ (27,986 ) $ 1,152 $ (49,689 ) $ (1,118 )attributable toStratasys Ltd. Net income (loss) perordinary shareattributable toStratasys Ltd.Basic $ (0.51 ) $ 0.02 $ (0.91 ) $ (0.02 )

Diluted $ (0.51 ) $ 0.02 $ (0.91 ) $ (0.02 )

Basic 54,917 54,231 54,733 54,102

Diluted 54,917 54,687 54,733 54,102

Three Months Ended June 30,

2020 Non-GAAP 2020 2019 Non-GAAP 2019

GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP

U.S. dollars and shares in thousands (except per share amounts)

Gross profit $ 43,736 $ 9,612 $ 53,348 $ 81,167 $ 4,441 $ 85,608 (1) Operating (29,278 ) 21,228 (8,050 ) (805 ) 8,246 9,051 income (loss) (1,2) Net income (loss) (27,986 ) 20,634 (7,353 ) 1,152 7,372 8,524 attributable to Stratasys Ltd. (1,2,3) Net income (loss) per diluted share $ (0.51 ) $ 0.38 $ (0.13 ) $ 0.02 $ 0.14 $ 0.16 attributable to Stratasys Ltd. (4) Acquired(1) intangible 4,065 3,900 assets amortization expense Non-cash stock-based 497 541 compensation expense Restructuring 5,050 - and other related costs 9,612 4,441

Acquired(2) intangible 2,125 1,783 assets amortization expense Non-cash stock-based 5,614 5,552 compensation expense Restructuring 3,798 (3,530 ) and other related costs Other 79 - expenses 11,616 3,805

21,228 8,246

(3) Corresponding (669 ) (874 ) tax effect Equity method related amortization, 75 - divestments and impairments $ 20,634 $ 7,372

Weighted average(4) number of 54,917 54,917 54,687 54,687 ordinary shares outstanding- Diluted

Six Months Ended June 30,

2020 Non-GAAP 2020 2019 Non-GAAP 2019

GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP

U.S. dollars and shares in thousands (except per share amounts)

Gross profit $ 103,606 $ 14,026 $ 117,632 $ 157,624 $ 8,693 $ 166,317 (1) Operating (49,178 ) 32,719 (16,459 ) (2,466 ) 18,321 15,855 income (loss) (1,2) Net income (loss) attributable (49,689 ) 31,771 (17,919 ) (118 ) 15,299 14,181 to Stratasys Ltd. (1,2,3) Net income (loss) per diluted share $ (0.91 ) $ 0.58 $ (0.33 ) $ (0.02 ) $ 0.28 $ 0.26 attributable to Stratasys Ltd. (4) Acquired(1) intangible 8,130 7,798 assets amortization expense Non-cash stock-based 899 895 compensation expense Restructuring 4,997 - and other related costs 14,026 8,693

Acquired(2) intangible 4,267 3,672 assets amortization expense Non-cash stock-based 10,119 9,427 compensation expense Restructuring 3,829 (3,471 ) and other related costs Other 478 - expenses 18,693 9,628

32,719 18,321

(3) Corresponding (1,100 ) (1,418 ) tax effect Equity method related amortization, 152 (1,604 ) divestments and impairments $ 31,771 $ 15,299

Weighted average(4) number of 54,733 54,733 54,102 54,585 ordinary shares outstanding- Diluted

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CONTACT: Stratasys Investor Relations Yonah Lloyd Vice President - Investor Relations Yonah.Lloyd@stratasys.com