Company reports a second quarter GAAP loss of ($0.07) per share

MINNEAPOLIS & REHOVOT, Israel–(BUSINESS WIRE)– Stratasys Ltd. (NASDAQ: SSYS) today announced record financial results for the second quarter of 2013.

Q2 Financial Results Summary:

  • Non-GAAP revenue of $106.7 million for the second quarter of 2013 represents a 20% organic increase over the $88.7 million pro forma revenue recorded for the same period last year after giving effect to the Stratasys-Objet merger as though it closed on January 1, 2011.
  • GAAP revenue for the second quarter was $106.5 million.
  • Non-GAAP net income of $18.6 million for the second quarter, or $0.45 per diluted share, represents a 32% increase over pro forma non-GAAP net income of $14.1 million, or $0.35 per diluted share, reported for the same period last year.
  • GAAP net income for the second quarter was a loss of $2.8 million, or ($0.07) per share, versus a pro forma loss of $6.9 million, or ($0.19) per share, for the same period last year.
  • Non-GAAP gross margins improved to 59.2% for the second quarter from pro forma non-GAAP gross margins of 57.5% in the same period last year.
  • GAAP gross margins improved to 47.3% for the second quarter from pro forma gross margins of 45.3% in the same period last year.
  • The company invested a net amount of $10.3 million in R&D during the second quarter, representing 9.7% of sales.
  • On a combined basis, the company has shipped a cumulative 32,245 systems worldwide as of June 30, 2013.

We sustained positive momentum in the second quarter as global demand for our products and services remained strong, said David Reis, chief executive officer of Stratasys (SSYS). Our growth in the second quarter accelerated compared to the first quarter, as the benefits of our recent channel integration and cross-selling initiatives have begun to materialize. This occurred while we continued to invest significantly in other merger integration initiatives. In addition, our margins were favorably impacted by the operating synergies produced by the Stratasys-Objet merger, and the strong sales of our higher-margin products and services. We are very pleased with our record second quarter results.

Q2 Business Highlights:

  • Announced the signing of a merger agreement with MakerBot, a leading manufacturer of systems and ecosystem developer within the rapidly growing desktop 3D printing segment.
  • Completed the critical sales, marketing and service team integration initiatives that resulted from the merger of Stratasys and Objet.
  • Observed significant cross-selling opportunities develop within the companys recently-combined channel, with opportunities expected to build over the coming quarters.
  • Received a multi-million-dollar order that will be shipped in the second half of 2013 from a leading Fortune 500 company for the purchase of multiple Fortus 3D production systems to be used for functional prototyping, and the manufacture of tools and end-use products.

With our critical Stratasys-Objet merger-integration activities nearly complete, we can now focus more intently on leveraging our combined sales and marketing organization to drive faster growth, continued Reis. Manufacturing applications remain one of the critical drivers of this growth, which was highlighted by the sizable order we received from a leading manufacturer for Fortus systems during the quarter. In addition, we are excited about our announced plan to merge with MakerBot, which we believe will accelerate our growth within the rapidly expanding segment for desktop 3D printers.

Financial Guidance

As previously communicated, the merger with MakerBot is expected to accelerate Stratasys growth rate and be slightly dilutive to Non-GAAP earnings per share in 2013 and accretive to Stratasys Non-GAAP earnings per share by the end of 2014. Stratasys updated its following financial guidance for the fiscal year ending December 31, 2013 to take into consideration the pending merger with MakerBot, with the assumption this merger is completed by mid-August:

  • Revenue guidance of $455 million to $480 million; versus previous guidance of $430 million to $445 million.
  • Non-GAAP earnings guidance of $1.75 to $1.90 per diluted share; versus previous guidance of $1.80 to $1.95 per diluted share.
  • GAAP earnings guidance of a ($0.76) to ($0.49) per share loss; versus previous guidance of a ($0.41) to ($0.16) per share loss.

Non-GAAP earnings guidance excludes $65.2 million of projected amortization of intangible assets; $21.0 million to $23.6 million of share-based compensation expense; and $16.3 million to $18.9 million in merger-related expenses.

Organic revenue growth is expected to be relatively stronger toward the end of this year as the company progresses with its Stratasys-Objet integration plan and realizes revenue synergies from selling the combined product portfolio.

Appropriate reconciliations between GAAP and non-GAAP financial measures are provided in a table at the end of this press release. The table provides itemized detail of the non-GAAP financial measures.

We begin the third quarter with positive sales momentum and a strong pipeline of opportunities within the channel. The benefits from our recent integration initiatives are tangible, and we are very excited about our plan to merge with Makerbot, which we expect to close in the middle of this month. Although we are pleased with our near-term performance and continue to project strong growth for the year, we also remain focused on developing the many opportunities that can drive long-term growth for our shareholders, Reis concluded.

Stratasys Ltd. Q2-2013 Conference Call Details

Stratasys will hold a conference call to discuss its second quarter financial results on Thursday, August 8, 2013 at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the Stratasys Web site at www.stratasys.com under the “Investors” tab; or directly at the following web address: http://edge.media-server.com/m/p/g4fsvrbx/lan/en.

To participate by telephone, the domestic dial-in number is 866-271-6130 and the international dial-in is 617-213-8894. The access code is 72015855. Investors are advised to dial into the call at least ten minutes prior to the call to register.

The webcast will be available for 90 days on the “Investors” page of the Stratasys Web site or by accessing the provided web address.

(Financial tables follow)

Cautionary Statement Regarding Forward-Looking Statements

Certain information included or incorporated by reference in this press 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 often characterized by the use of forward-looking terminology such as may, will, expect, anticipate, estimate, continue, believe, should, intend, project or other similar words, but are not the only way these statements are identified. These forward-looking statements may include, but are not limited to, statements relating to the companys objectives, plans and strategies, statements that contain projections of results of operations or of financial condition (including, with respect to the planned MakerBot merger) and all statements (other than statements of historical facts) that address activities, events or developments that the company intends, expects, projects, believes or anticipates will or may occur in the future. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. The company has based these forward-looking statements on assumptions and assessments made by its management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. 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 companys ability to efficiently and successfully integrate the operations of Stratasys, Inc. and Objet Ltd. after their merger as well as the ability to complete the MakerBot merger and to successfully put in place and execute an effective post-merger integration plan; the overall global economic environment; the impact of competition and new technologies; general market, political and economic conditions in the countries in which the company operates; projected capital expenditures and liquidity; changes in the companys strategy; government regulations and approvals; changes in customers budgeting priorities; litigation and regulatory proceedings; and those factors referred to under Risk Factors, Information on the Company, Operating and Financial Review and Prospects, and generally in the companys annual report on Form 20-F for the year ended December 31, 2012 filed with the U.S. Securities and Exchange Commission and in other reports that the Company has filed with the SEC (SCUR). Readers are urged to carefully review and consider the various disclosures made in the companys SEC reports, which are designed to advise interested parties of the risks and factors that may affect its business, financial condition, results of operations and prospects. Any forward-looking statements in this press release are made as of the date hereof, and the company 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.

Non-GAAP Discussion Disclosure

The information discussed within this release includes financial results and projections that are in accordance with accounting principles generally accepted in the United States (GAAP). In addition, certain non-GAAP financial measures have been provided that exclude certain charges, expenses and income. The non-GAAP measures should be read in conjunction with the corresponding GAAP measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance with GAAP. The non-GAAP financial measures are provided in an effort to provide information that investors may deem relevant to evaluate results from the companys core business operations and to compare the companys performance with prior periods. The non-GAAP financial measures primarily identify and exclude certain discrete items, such as merger-related expenses, amortization expenses and expenses associated with share-based compensation required under ASC 718. The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.

This release is available on the Stratasys web site at www.stratasys.com

Stratasys Ltd. (Nasdaq: SSYS) is the corporate entity formed in 2012 by the merger of 3D printing companies Stratasys Inc. and Objet Ltd., based in Minneapolis, Minn. and Rehovot, Israel. Stratasys manufactures 3D printers and materials for prototyping and production. The companys patented FDM® and PolyJet® processes produce prototypes and manufactured goods directly from 3D CAD files or other 3D content. Systems include affordable desktop 3D printers for idea development, a range of systems for prototyping, and large production systems for direct digital manufacturing. Since June 2012, the companys range of over 130 3D printing materials has been the widest in the industry and includes more than 120 proprietary inkjet-based photopolymer materials and 10 proprietary FDM-based thermoplastic materials. Stratasys also manufactures Solidscape 3D Printers and operates the RedEye On Demand digital-manufacturing service. The company has more than 1100 employees, holds more than 500 granted or pending additive manufacturing patents globally, and has received more than 20 awards for its technology and leadership. Online at: www.stratasys.com or http://blog.stratasys.com

 
Stratasys Ltd.
 
Consolidated Statements of Operations
 
(in thousands, except per share data)
                         
      Three Months Ended June 30,     Six Months Ended June 30,
      2013     2012     2013     2012
      (unaudited)     (unaudited)     (unaudited)     (unaudited)
Net sales                        
Products     $ 90,213       $ 41,444     $ 172,023       $ 78,990
Services       16,272         7,962       31,669         15,380
        106,485         49,406       203,692         94,370
                         
Cost of sales                        
Products       45,731         18,651       94,774         36,462
Services       10,349         4,595       21,139         8,794
        56,080         23,246       115,913         45,256
                         
Gross profit       50,405         26,160       87,779         49,114
                         
Operating expenses                        
Research and development, net       10,337         4,157       21,126         8,509
Selling, general and administrative       42,665         16,210       85,990         27,585
        53,002         20,367       107,116         36,094
                         
Operating income (loss)       (2,597 )       5,793       (19,337 )       13,020
                         
Other income       138         59       652         355
                         
Income (loss) before income taxes       (2,459 )       5,852       (18,685 )       13,375
                         
Income taxes (benefit)       326         2,834       (417 )       5,835
                         
Net income (loss)     $ (2,785 )     $ 3,018     $ (18,268 )     $ 7,540
                         
Net income attributable to non-controlling interest     $ 15       $     $ 68       $
                         
Net income (loss) attributable to Stratasys Ltd.     $ (2,800 )     $ 3,018     $ (18,336 )     $ 7,540
                         
Net income (loss) per ordinary share attributable to Stratasys Ltd.                        
Basic     $ (0.07 )     $ 0.14     $ (0.47 )     $ 0.35
Diluted       (0.07 )       0.14       (0.47 )       0.35
                         
Weighted average ordinary shares outstanding                        
Basic       38,781         21,312       38,637         21,289
Diluted       38,781         21,834       38,637         21,800
                                     
 
Stratasys Ltd.
 
Consolidated Balance Sheets
 
(in thousands)
      June 30,     December 31,
      2013     2012
      (unaudited)        
ASSETS              
               
Current assets              
Cash and cash equivalents     $ 148,061       $ 133,826  
Short-term bank deposits             20,063  
Restricted deposits       834         929  
Accounts receivable:              
Trade, net       81,443         64,678  
Other       22,055         22,934  
Inventories       64,603         67,995  
Net investment in sales-type leases, net       5,687         5,134  
Prepaid expenses       3,138         2,751  
Deferred income taxes       9,834         4,968  
               
Total current assets       335,655         323,278  
               
Property, plant and equipment, net       68,256         62,070  
               
Other assets              
Goodwill       822,463         822,475  
Other intangible assets, net       484,798         510,372  
Net investment in sales-type leases       9,206         7,872  
Amounts funded in respect of employees              
rights upon retirement       2,844         2,628  
Other non-current assets       2,928         2,818  
               
Total other assets       1,322,239         1,346,165  
               
Total assets     $ 1,726,150       $ 1,731,513  
               
LIABILITIES AND EQUITY              
               
Current liabilities              
Accounts payable     $ 24,077       $ 35,235  
Other current liabilities       41,116         41,124  
Unearned revenues       25,140         18,068  
               
Total current liabilities       90,333         94,427  
               
Non-current liabilities              
Employee rights upon retirement       4,437         4,188  
Deferred tax liabilities       51,194         54,693  
Unearned revenues – long-term       3,155         3,181  
Other non-current liabilities       6,077         2,868  
               
Total liabilities       155,196         159,357  
               
Commitments and contingencies              
               
Equity              
Ordinary shares, NIS 0.01 nominal value, authorized 60,000 shares;              
38,669 and 38,372 shares issued and outstanding at March 31,              
2013 and December 31, 2012, respectively       102         101  
Additional paid-in capital       1,477,121         1,459,294  
Retained earnings       94,167         112,503  
Accumulated other comprehensive loss       (593 )       (238 )
               
Equity attributable to Stratasys Ltd.       1,570,797         1,571,660  
               
Non-controlling interest       157         496  
               
Total equity       1,570,954         1,572,156  
               
Total liabilities and equity     $ 1,726,150       $ 1,731,513  
               
       
Stratasys Ltd.  
       
Reconciliation of Pro Forma GAAP to Pro Forma Non-GAAP Results of Operations  
       
(in thousands, except per share data)  
                                           
      Three Months Ended June 30, 2013     Three Months Ended June 30, 2012
                        Pro Forma           Pro Forma
      GAAP           Non-GAAP     GAAP           Non-GAAP
      (unaudited)     Adjustments*     (unaudited)     (unaudited)     Adjustments*     (unaudited)
Net sales                                          
Products     $ 90,213       $ 199       $ 90,412     $ 76,077       $       $ 76,077
Services       16,272                 16,272       12,656                 12,656
        106,485         199         106,684       88,733                 88,733
                                           
Cost of sales                                          
Products       45,731         (12,171 )       33,560       39,980         (10,530 )       29,450
Services       10,349         (343 )       10,006       8,535         (311 )       8,224
        56,080         (12,514 )       43,566       48,515         (10,841 )       37,674
                                           
Gross profit       50,405         12,713         63,118       40,218         10,841         51,059
                                           
Operating expenses                                          
Research and development, net       10,337         (846 )       9,491       8,833         (850 )       7,983
Selling, general and administrative       42,665         (10,748 )       31,917       36,636         (11,115 )       25,521
        53,002         (11,594 )       41,408       45,469         (11,965 )       33,504
                                           
Operating income (loss)       (2,597 )       24,307         21,710       (5,251 )       22,806         17,555
                                           
Other income       138                 138       714                 714
                                           
Income (loss) before income taxes       (2,459 )       24,307         21,848       (4,537 )       22,806         18,269
                                           
Income taxes       326         2,917         3,242       2,387         1,761         4,148
                                           
Net income (loss)     $ (2,785 )     $ 21,390       $ 18,606     $ (6,924 )     $ 21,045       $ 14,121
                                           
Net income attributable to non-controlling interest     $ 15       $ 24       $ 40     $       $       $
                                           
Net income (loss) attributable to Stratasys Ltd.     $ (2,800 )     $ 21,366       $ 18,566     $ (6,924 )     $ 21,045       $ 14,121
                                           
Net income (loss) per ordinary share attributable to Stratasys Ltd.                                          
Basic     $ (0.07 )           $ 0.48     $ (0.19 )           $ 0.38
Diluted       (0.07 )             0.45       (0.19 )             0.35
                                           
Weighted average ordinary shares outstanding                                          
Basic       38,781               38,781       36,757               36,757
Diluted       38,781               41,146       36,757               40,040
                                           

The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes, however these measures should not be viewed as a substitute for the Companys GAAP results.

* Refer to the “Reconciliation of Non-GAAP Adjustments” herein for further information regarding adjustments.

       
Stratasys Ltd.  
       
Reconciliation of Pro Forma GAAP to Pro Forma Non-GAAP Results of Operations  
       
(in thousands, except per share data)
                                           
      Six Months Ended June 30, 2013     Six Months Ended June 30, 2012
                        Pro Forma         Pro Forma
      GAAP           Non-GAAP     GAAP         Non-GAAP
      (unaudited)     Adjustments*     (unaudited)     (unaudited)     Adjustments*   (unaudited)
Net sales                                          
Products     $ 172,023       $ 1,214       $ 173,237     $ 147,318       $       $ 147,318
Services     $ 31,669       $       $ 31,669     $ 24,454       $       $ 24,454
        203,692         1,214         204,906       171,772                 171,772
                                           
Cost of sales                                          
Products       94,774         (31,348 )       63,426       78,406         (21,052 )       57,354
Services       21,139         (685 )       20,454       16,921         (658 )       16,263
        115,913         (32,033 )       83,880       95,327         (21,710 )       73,617
                                           
Gross profit       87,779         33,247         121,026       76,445         21,710         98,155
                                           
Operating expenses                                          
Research and development, net       21,126         (1,745 )       19,381       17,905         (1,721 )       16,184
Selling, general and administrative       85,990         (26,356 )       59,634       69,748         (21,791 )       47,957
        107,116         (28,101 )       79,015       87,653         (23,512 )       64,141
                                           
Operating income (loss)       (19,337 )       61,348         42,011       (11,208 )       45,222         34,014
                                           
Other income       652                 652       907                 907
                                           
Income (loss) before income taxes       (18,685 )       61,348         42,663       (10,301 )       45,222         34,921
                                           
Income taxes (benefit)       (417 )       6,803         6,385       4,997         3,214         8,211
                                           
Net income (loss)     $ (18,268 )     $ 54,545       $ 36,278     $ (15,298 )     $ 42,008       $ 26,710
                                           
Net income attributable to non-controlling interest     $ 68       $ 64       $ 133     $       $       $
                                           
Net income (loss) attributable to Stratasys Ltd.     $ (18,336 )     $ 54,481       $ 36,145     $ (15,298 )     $ 42,008       $ 26,710
                                           
Net income (loss) per ordinary share attributable to Stratasys Ltd.                                          
Basic     $ (0.47 )           $ 0.94     $ (0.42 )           $ 0.73
Diluted       (0.47 )             0.88       (0.42 )             0.67
                                           
Weighted average ordinary shares outstanding                                          
Basic       38,637               38,637       36,734               36,734
Diluted       38,637               41,111       36,734               39,931
                                           

The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes, however these measures should not be viewed as a substitute for the Companys GAAP results.

* Refer to the “Reconciliation of Non-GAAP Adjustments” herein for further information regarding adjustments.

 
Stratasys Ltd.
 
Reconciliation of Non-GAAP Adjustments
 
(in thousands)
                         
      Three Months Ended June 30,     Six Months Ended June 30,
      2013     2012     2013     2012
Net sales, products                        
Deferred revenue step-up       199                 1,214          
                         
Cost of sales, products                        
Objet intangible assets amortization expense       (11,344 )       (9,823 )       (29,670 )       (19,648 )
Solidscape intangible assets amortization expense       (436 )       (436 )       (872 )       (872 )
Non-cash stock-based compensation expense       (314 )       (271 )       (633 )       (532 )
Merger related expense       (77 )               (173 )        
        (12,171 )       (10,530 )       (31,348 )       (21,052 )
Cost of sales, services                        
Non-cash stock-based compensation expense       (318 )       (311 )       (633 )       (658 )
Merger related expense       (25 )               (52 )        
        (343 )       (311 )       (685 )       (658 )
Research and development, net                        
Non-cash stock-based compensation expense       (846 )       (850 )       (1,745 )       (1,721 )
                         
Selling, general and administrative                        
Objet intangible assets amortization expense       (2,292 )       (2,242 )       (7,620 )       (4,484 )
Solidscape intangible assets amortization expense       (133 )       (133 )       (266 )       (266 )
Non-cash stock-based compensation expense       (3,881 )       (5,490 )       (7,839 )       (10,603 )
Solidscape acquisition expense                               (130 )
Merger related expense       (4,442 )       (3,250 )       (10,631 )       (6,308 )
        (10,748 )       (11,115 )       (26,356 )       (21,791 )
Income taxes                        
Tax expense related to non-GAAP adjustments       2,917         1,761         6,803         3,214  
                         
Net income attributable to non-controlling interest                        
Depreciation and amortization expense attributable to non-controlling interest       24                 64          
                         
Net income     $ 21,366       $ 21,045       $ 54,481       $ 42,008  
                         
 
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
       
Fiscal Year 2013     Earnings (loss) Per Diluted Share Range
       
U.S. GAAP measure     ($0.76) to ($0.49)
       
Adjustments      
Stock-based compensation expense     $0.49 to $0.55
Intangible assets amortization expense     $1.52
Merger related expense     $0.38 to $0.44
       
Non-GAAP estimate     $1.75 to $1.90
       

 

https://cts.businesswire.com/ct/CT?id=bwnews&sty=20130808005374r1&sid=acqr4&distro=nx

Stratasys Ltd. Shane Glenn, 952-294-3416 Vice President of Investor Relations shane.glenn@stratasys.com

Source: Stratasys Ltd.

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