[Condensed Consolidated Interim Financial Statements](index=1&type=section&id=Condensed%20Consolidated%20Interim%20Financial%20Statements) [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2023, Stratasys' total assets were $1.23 billion, a slight decrease from $1.26 billion at the end of 2022, driven by reduced cash and short-term deposits, partially offset by increases in inventories, goodwill, and other intangible assets from acquisitions, while total liabilities increased modestly to $307.2 million and total equity declined to $923.2 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $144,366 | $150,470 | ($6,104) | | Inventories | $211,186 | $194,054 | $17,132 | | Goodwill | $92,946 | $64,953 | $27,993 | | Other intangible assets, net | $148,613 | $121,402 | $27,211 | | **Total Assets** | **$1,230,425** | **$1,259,790** | **($29,365)** | | **Liabilities & Equity** | | | | | Total current liabilities | $208,797 | $210,654 | ($1,857) | | Total non-current liabilities | $98,401 | $89,704 | $8,697 | | **Total Liabilities** | **$307,198** | **$300,358** | **$6,840** | | **Total Equity** | **$923,227** | **$959,432** | **($36,205)** | [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the three and six months ended June 30, 2023, Stratasys reported decreased revenues and a widened operating loss, leading to increased net loss per share due to higher operating expenses, particularly in selling, general, and administrative costs Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$159,751** | **$166,603** | **$309,128** | **$330,032** | | Gross Profit | $66,222 | $67,393 | $131,617 | $137,070 | | Operating Loss | ($33,659) | ($23,545) | ($50,456) | ($43,129) | | Net Loss | ($38,615) | ($24,385) | ($60,839) | ($45,333) | | **Net Loss Per Share** | **($0.56)** | **($0.37)** | **($0.89)** | **($0.69)** | - Selling, general and administrative expenses increased to **$75.6 million** in Q2 2023 from **$66.6 million** in Q2 2022, contributing to the wider operating loss[8](index=8&type=chunk) [Consolidated Statements of Changes in Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased from $959.4 million at the beginning of 2023 to $923.2 million by June 30, 2023, primarily due to a comprehensive loss of $60.7 million, partially offset by equity increases from stock-based compensation and share issuances Reconciliation of Total Equity (in thousands) | Description | Amount | | :--- | :--- | | **Balance as of December 31, 2022** | **$959,432** | | Comprehensive loss (H1 2023) | ($60,692) | | Stock-based compensation | $16,263 | | Issuance of shares (stock plans & acquisition) | $8,219 | | **Balance as of June 30, 2023** | **$923,227** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash used in operating activities was $41.2 million, while investing activities provided $36.6 million, primarily from short-term bank deposits, with a significant outflow of $66.5 million for acquisitions, resulting in a decrease in cash and cash equivalents to $144.4 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($41,167) | ($38,909) | | Net cash provided by investing activities | $36,628 | $63,172 | | Net cash used in financing activities | ($682) | ($864) | | **Net change in cash and cash equivalents** | **($6,045)** | **$15,986** | - The company paid **$66.5 million** for acquisitions during the first six months of 2023, a significant use of cash in investing activities[13](index=13&type=chunk) [Notes to Condensed Consolidated Interim Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Interim%20Financial%20Statements) The notes detail the basis of presentation, significant accounting policies, and key events during the period, including the acquisition of Covestro's additive manufacturing business, the pending merger with Desktop Metal, corporate actions involving tender offers and proposals from Nano Dimension and 3D Systems, and provide disaggregation of revenue, details on goodwill, intangible assets, equity components, and ongoing legal contingencies [Note 1. Business Description and Basis of Presentation](index=9&type=section&id=Note%201%2E%20Business%20Description%20and%20Basis%20of%20Presentation) Stratasys is a global leader in connected, polymer-based 3D printing solutions, focusing on the entire manufacturing value chain, with financial statements prepared under U.S. GAAP and reflecting management's estimates subject to macroeconomic uncertainties - The company focuses on the manufacturing sector, which it views as having the largest and fastest-growing total addressable market for its 3D printing solutions[15](index=15&type=chunk) [Note 3. Certain Transactions](index=10&type=section&id=Note%203%2E%20Certain%20Transactions) This note details significant transactions, including the 2022 merger of its MakerBot subsidiary with Ultimaker, resulting in a 46.5% equity method investment, and the April 2023 acquisition of Covestro AG's additive manufacturing materials business for $59.2 million - On April 3, 2023, the company acquired Covestro AG's additive manufacturing materials business for a total consideration of **$59.2 million**, which included **$53.3 million** in cash, **$5.2 million** in shares, and **$0.7 million** in contingent consideration[23](index=23&type=chunk)[25](index=25&type=chunk) - The preliminary purchase price allocation for the Covestro acquisition resulted in **$23.1 million** of goodwill and **$22.4 million** of intangible assets[27](index=27&type=chunk) - The company holds a **46.5% stake** in Ultimaker, accounted for using the equity method, with the investment valued at **$92.9 million** as of June 30, 2023[20](index=20&type=chunk)[22](index=22&type=chunk) [Note 4. Recent developments](index=13&type=section&id=Note%204%2E%20Recent%20developments) The company has been involved in significant M&A activities, including a definitive merger agreement with Desktop Metal, a hostile partial tender offer from Nano Dimension that expired unsuccessfully, and ongoing discussions regarding unsolicited merger proposals from 3D Systems - Announced a merger agreement with Desktop Metal on May 25, 2023, where Stratasys shareholders would own **59%** of the combined company[31](index=31&type=chunk) - Faced a hostile tender offer from Nano Dimension, which was raised to **$25.00 per share** before expiring unsuccessfully on July 31, 2023[32](index=32&type=chunk) - Received and entered into discussions regarding an unsolicited merger proposal from 3D Systems after its board deemed it a potential 'Superior Proposal' to the Desktop Metal deal[34](index=34&type=chunk) [Note 5. Revenues](index=14&type=section&id=Note%205%2E%20Revenues) Total revenue for Q2 2023 was $159.8 million, down from $166.6 million in Q2 2022, with the Americas remaining the largest region but experiencing a decline, while EMEA was the only region to show growth, and Remaining Performance Obligations totaled $107.4 million as of June 30, 2023 Revenue by Geography (in thousands) | Region | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Americas | $102,195 | $107,225 | $192,275 | $205,792 | | EMEA | $36,884 | $35,212 | $74,764 | $75,267 | | Asia Pacific | $20,672 | $24,166 | $42,089 | $48,973 | | **Total** | **$159,751** | **$166,603** | **$309,128** | **$330,032** | - As of June 30, 2023, Remaining Performance Obligations (RPO) totaled **$107.4 million**, representing contracted revenue yet to be recognized[41](index=41&type=chunk) - Deferred revenue increased to **$79.3 million** as of June 30, 2023, from **$75.4 million** at the end of 2022[39](index=39&type=chunk)[40](index=40&type=chunk) [Note 6. Inventories](index=16&type=section&id=Note%206%2E%20Inventories) Total inventories increased to $211.2 million as of June 30, 2023, up from $194.1 million at December 31, 2022, primarily driven by a rise in raw materials and finished goods Inventory Breakdown (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Raw materials | $110,790 | $104,928 | | Work-in-process | $11,429 | $7,562 | | Finished goods | $88,967 | $81,564 | | **Total** | **$211,186** | **$194,054** | [Note 7. Goodwill and Other Intangible Assets](index=16&type=section&id=Note%207%2E%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill increased by $28.0 million during the first six months of 2023, reaching $92.9 million, primarily due to acquisitions, while other intangible assets, net, also grew to $148.6 million from $121.4 million, with amortization expense for intangible assets totaling $13.3 million for the six-month period - Goodwill increased from **$65.0 million** on January 1, 2023, to **$92.9 million** on June 30, 2023, with **$27.8 million** added from acquisitions[47](index=47&type=chunk) Other Intangible Assets, Net (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Developed technology | $114,603 | $103,932 | | Customer relationships | $19,100 | $6,684 | | Patents | $8,318 | $8,538 | | Trademarks and trade names | $6,592 | $2,248 | | **Total** | **$148,613** | **$121,402** | [Note 12. Equity](index=20&type=section&id=Note%2012%2E%20Equity) This note covers equity-related activities, including stock-based compensation expense of $16.3 million for the first six months of 2023, details on stock option and RSU/PSU activity with $57.6 million in unrecognized compensation cost, and the company's shareholder Rights Plan designed to protect against hostile takeovers - Total stock-based compensation expense was **$16.3 million** for the six months ended June 30, 2023, compared to **$17.4 million** for the same period in 2022[66](index=66&type=chunk) - As of June 30, 2023, there was **$57.6 million** of unrecognized compensation cost related to unvested RSUs and PSUs, expected to be recognized over a weighted-average period of **2.72 years**[69](index=69&type=chunk) - The company has a shareholder Rights Plan that becomes exercisable if a person or group acquires **15% or more** of outstanding shares without board approval, with its expiration extended in connection with the Desktop Metal merger agreement[73](index=73&type=chunk) [Note 13. Contingencies](index=22&type=section&id=Note%2013%2E%20Contingencies) The company is involved in litigation with Nano Dimension in an Israeli court regarding Stratasys' shareholder Rights Plan and Nano's tender offer, with the court expressing a preliminary view that rights plans are permissible under Israeli law but requiring the board to justify their adoption - Stratasys is in litigation with Nano Dimension over its shareholder rights plan and Nano's tender offer[74](index=74&type=chunk) - An Israeli court expressed a preliminary view that shareholder rights plans are permissible under Israeli law, but the board must justify their adoption[76](index=76&type=chunk)

Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2023 was $149.4 million, down 2.6% compared to Q1 2022 when adjusted for divestitures and at constant currency, and down 8.6% compared to unadjusted revenues [23] - GAAP gross margin was 43.8% for the quarter, compared to 42.6% for the same period last year, while non-GAAP gross margin was 47.3%, flat compared to the same period last year [25] - GAAP net loss for the quarter was $22.2 million or $0.33 per diluted share, compared to a net loss of $20.9 million or $0.32 per diluted share for the same period last year [27] Business Line Data and Key Metrics Changes - Product revenue declined by 10.7% to $101 million compared to the same period last year, with system revenue down 25.8% to $40.5 million [23][24] - Consumables revenue rose by 3.3% to $60.5 million, marking a record level for Stratasys, indicating strong utilization rates of sold systems [24] - Services revenue was $48.4 million, down 3.9% compared to the same period last year, but customer service revenue reached its highest ever [24] Market Data and Key Metrics Changes - The ongoing macroeconomic challenges are causing longer sales cycles and occasional order deferrals, impacting OEM revenue which was relatively flat compared to the first quarter of last year [10] - The manufacturing trend of on-shoring and de-globalization is creating growth opportunities for Stratasys, particularly in manufacturing applications [11] Company Strategy and Development Direction - The company aims to surpass $1 billion in revenue by 2026 with substantial profitability, focusing on new technologies and expanding its customer reach [9][31] - Stratasys is committed to enhancing shareholder value and executing its growth strategy despite unsolicited acquisition proposals from Nano Dimension [7][8] - The company is expanding its software capabilities, introducing GrabCAD Print Pro to enhance productivity and integrate into Industry 4.0 infrastructure [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth potential despite a challenging macro backdrop, noting strong engagement with customers and a balanced sales cycle [48] - The outlook for 2023 includes revenue guidance raised to between $630 million to $670 million, with expectations for improved growth in the second half of the year [29] - Management anticipates achieving non-GAAP gross margins above 50% starting in 2024, driven by increased manufacturing revenue and the acquisition of Covestro [31][66] Other Important Information - The company ended the quarter with $288 million in cash and equivalents, supporting growth through organic investments and acquisitions [13] - Stratasys has introduced new products in the dental sector, including the TrueDent solution, which is expected to disrupt the market and generate significant revenue [14][54] Q&A Session Summary Question: Can you provide more specifics on the billion-dollar target? - Management emphasized a structured long-term planning approach and confidence in achieving the target based on established growth drivers and new technologies [35][36] Question: What are the main drivers for consumables revenue growth? - The main drivers include increased utilization rates and a shift towards manufacturing applications, particularly in the dental sector [39] Question: What is the status of the Covestro acquisition? - The acquisition closed in early April, with no contribution to Q1 revenues, but expected to have a full impact starting Q2 [43] Question: How is the demand landscape evolving? - Management noted high levels of engagement and improved top-of-funnel demand, leading to confidence in the second half of the year [48] Question: What are the expectations for operating expenses throughout the year? - Operating expenses are expected to remain tight, with a slight increase due to the Covestro acquisition, but overall efficiency is maintained [50] Question: How does the company plan to penetrate the dental market? - The strategy includes a multi-channel approach, focusing on building confidence with dental labs and working with dental equipment distributors [58]

Exhibit 99.1 STRATASYS LTD. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED) INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED) | --- | --- | |--------------------------------------------------------------------------|-------| | Item | Page | | Consolidated Balance Sheets | 2 | | Consolidated Statements of Operations and Comprehensive Loss | 3 | | Consolidated Statements of Changes in Equ ...

Financial Data and Key Metrics Changes - For Q4 2022, consolidated revenue was $159.3 million, down 4.6% year-over-year, and down 2.8% on a constant currency basis. Adjusted for the MakerBot divestment, revenue grew 1.7% at constant currency [23] - Full-year 2022 consolidated revenue increased by 7.3%, 9.6% on a constant currency basis, and 11.4% at constant currency after excluding MakerBot [25] - GAAP gross margin for Q4 was 43.1%, slightly down from 43.7% in the same period last year. Non-GAAP gross margin was 48.4%, compared to 48.7% year-over-year [26] - GAAP net loss for Q4 was $2.4 million or $0.04 per diluted share, an improvement from a net loss of $4.8 million or $0.07 per diluted share in the same period last year [28] Business Line Data and Key Metrics Changes - Product revenue in Q4 fell by 5.8% to $111.2 million, but grew 1.6% excluding divestitures on a constant currency basis. Systems revenue was down 11.1% to $54.9 million, while consumables revenue was flat at $56.3 million [23][24] - For the full year, product revenue grew by 8.3% compared to 2021, with system revenue increasing by 12.6% [25] - Service revenue for Q4 was $48.1 million, down 1.9% year-over-year, but customer support revenue grew by 1.9% [24] Market Data and Key Metrics Changes - The OEM business grew 3.2% in Q4 2022 on a constant currency basis compared to Q4 2021 [22] - Recurring revenue increased significantly in 2022, with consumables up 7.7% and customer support up 11% on a constant currency basis [11] Company Strategy and Development Direction - The company aims to be the leading innovator in polymer-based additive manufacturing solutions, focusing on both organic and acquired technology offerings [7] - The acquisition of Riven and Axial3D positions the company for growth in AI-driven 3D printing solutions, particularly in healthcare [11] - The company plans to unlock new sales opportunities in materials through the Covestro AM acquisition and has formed a partnership with Ultimaker [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing inflationary pressures and potential recession concerns impacting customer capital spending, leading to longer sales cycles [10] - The company expects 2023 revenue to range between $620 million to $670 million, with a stronger second half due to new product launches [32][33] - Gross margins are expected to improve modestly in 2023, with a target range of 48% to 49% [33] Other Important Information - The company ended Q4 with $327.8 million in cash and cash equivalents, down from $348.7 million at the end of Q3 2022 [31] - The company anticipates a GAAP net loss of $78 million to $57 million for 2023, with non-GAAP net income expected to be between $9 million to $17 million [35] Q&A Session Summary Question: What is the current market situation and any specific strengths or weaknesses? - Management noted a microeconomic slowdown across the board but highlighted the company's diversification across geographies and verticals, which helps mitigate risks [40] Question: How confident is the company in the second half of the year? - Management expressed confidence due to new product launches and a strong installed base, despite macroeconomic challenges [43] Question: Can you elaborate on the Ricoh partnership? - The partnership aims to democratize access to 3D printing in medical applications, leveraging AI to transform medical files into 3D printable formats [47] Question: What is the outlook for gross margins? - Management indicated a path towards improving gross margins, with expectations to reach 50% as operational efficiencies improve and new products are introduced [49] Question: How does the company view long-term revenue growth? - Management emphasized the transition from prototyping to manufacturing, which is expected to drive significant growth in the coming years [53]

Tax Benefits and Grants - The company's average effective tax rate for Israeli operations under tax benefit programs is estimated to be between 7.5% and 14%, compared to the standard Israeli corporate tax rate of 23%[133] - The company has received approximately $9 million in R&D grants from the Israeli Innovation Authority since 2007, and $1.8 million from European authorities[135] - Royalties of 3% to 5% are required on revenues from products developed under IIA grants, up to the total grant amount received[136] - Transfer of IIA-funded know-how outside Israel may require a redemption fee of up to 600% of the grant amount plus interest[138] - Manufacturing products developed with IIA grants outside Israel may increase total liability to IIA to between 120% and 300% of the grants received[140] - The corporate tax rate in Israel is 23% since 2018, but can be lower for companies with specific enterprise statuses[294] - The company qualifies as an "Industrial Company" under Israeli law, entitling it to tax benefits like accelerated depreciation[295] - The company has received tax benefits under the Investment Law, reducing its effective tax rate below the statutory 23%[304] - Approved Enterprise programs can reduce corporate tax rates to between 10% and 25%, depending on foreign investment levels[298] - Foreign Investors' Companies (FICs) with over 25% foreign investment can extend tax benefits and reduce rates further[299] - Dividends from Approved Enterprise income are subject to a 15% withholding tax, which can be reduced under tax treaties[302] - The company has received final approval for its Approved Enterprise investment programs, ensuring continued tax benefits[304] - The 2005 Amendment introduced Beneficiary Enterprise status, allowing companies to claim tax benefits directly without prior approval[306] - Beneficiary Enterprise status requires at least 25% of business income from exports to specific markets[307] - The company waived the Approved / Beneficiary Enterprise regime starting from tax year 2021[312] - In 2021, the company released approximately $44.8 million out of its Exempt Profits and paid reduced tax of approximately $2.9 million[321] - As of December 31, 2022, the company had accumulated tax-exempt income of approximately $160.6 million, which would incur a tax liability of approximately $16.1 million if distributed[322] - The company is considering its qualification for the 2017 amendment and the potential to be classified as a Preferred Technology Enterprise or Special Preferred Technology Enterprise[320] Acquisitions and Business Development - The company has made several acquisitions including Origin (2020), RPS (2021), Xaar (2021), Riven (2022), and plans to acquire Covestro AG's additive manufacturing materials business in Q2 2023[148] - The company acquired Origin Inc. in December 2020, which introduced the P3 Programmable PhotoPolymerization technology, becoming a key growth driver[160] - The company acquired RPS in February 2021, expanding its polymer suite of solutions with the Neo® line of 3D printers[167] - The company acquired the remaining 55% of Xaar in November 2021, accelerating growth in production-scale 3D printing with the introduction of the Stratasys H350™ 3D printer[168] - The company signed a definitive agreement in August 2022 to acquire Covestro's AM materials business, expected to close in Q2 2023[169] - The company disposed of its subsidiary MakerBot in September 2022, retaining a 46.5% equity interest in the combined entity with UltiMarker[160] - The company acquired Riven in October 2022, integrating its cloud-based software into the GrabCAD additive manufacturing platform[160] - The company's acquisition strategy focuses on expanding its materials offerings, production capabilities, and market reach in the 3D printing industry[160] Financial Performance and Capital Expenditures - The company's ordinary share price has fluctuated between $11.07 and $54.37 from 2019 through early 2023[145] - The company does not anticipate paying cash dividends in the foreseeable future, retaining funds for business development[150] - The company's capital expenditures in 2022, 2021, and 2020 were $19.8 million, $26.8 million, and $29.0 million, respectively, with $13.6 million, $25.0 million, and $26.9 million primarily related to property, plant, and equipment[162] - The company invested an aggregate of $119.5 million in its new facility in Israel and related equipment as of December 31, 2022[162] Technology and Innovation - The company holds approximately 1,700 granted and pending additive technology patents, supporting its leadership in polymer-based 3D printing[165] - The company offers five different 3D printing technology platforms, more than any other vendor in the industry, each optimized for specific industry applications[170] - The company's GrabCAD Additive Manufacturing Platform enables smart and connected software ecosystems for additive manufacturing at scale[173] - The company's 3D printing solutions reduce industrial energy use and save airlines approximately 14,000 gallons of fuel per year per plane for every pound eliminated[179] - The company holds approximately 1,700 patents and pending patents internationally, utilizing proprietary technologies like FDM, PolyJet, SAF, and stereolithography[187] - The company's PolyJet technology supports over 600,000 color and texture combinations, including the industry's clearest material, nearly as clear as glass[189] - The company's FDM technology is suitable for office environments due to the absence of hazardous emissions and minimal material waste[188] - The company's stereolithography technology, including the Neo line of systems acquired via RPS in February 2021, offers superior part quality, system reliability, and an open choice of resins, with the latest acquisition of Covestro Additive Manufacturing expected to close in Q2 2023, enhancing the offering with the Somos® materials portfolio[190] - The P3 resin-based 3D printing technology, acquired through the Origin acquisition, provides a best-in-class combination of detail, mechanical properties, and throughput for mass production parts, supported by a strong materials portfolio including aerospace-grade and biocompatible materials[191] - SAF (Selective Absorption Fusion) technology, developed via a joint venture with Xaar plc and acquired in 2021, delivers production-level throughput for end-use parts with competitive cost per part, part quality, and consistency, using materials like PA11 derived from sustainable castor oil[192] - The company offers the widest range of 3D printing consumable materials in the industry, including 61 FDM spool-based filament materials, 49 PolyJet cartridge-based resin materials, and 158 functional materials, yielding over 600,000 color variations[193] - The company's FDM-based systems enable highly precise printing of engineering and high-performance thermoplastic materials, suitable for a wide range of manufacturing applications with minimal post-production processing[195] - PolyJet inkjet-based systems are used in prototyping and manufacturing applications, particularly in healthcare and dental, offering voxel-level control, multi-material and color printing, high accuracy, and smooth finish[196] - The P3-based systems, added via the Origin acquisition, offer best-in-class detail, mechanical properties, and throughput for mass manufacturing production parts, expanding leadership in industries like dental, medical, and tooling[197] - The company's SAF-based systems, launched in late 2021, expand the total addressable market across commercial goods, automotive, consumer goods, and service bureaus, with dynamic and variable laser beam technology for build accuracy and feature detail[198] - The company's GrabCAD Community has over 13 million professional engineers, designers, manufacturers, and students, providing a resource for CAD models and facilitating communication and design sharing[205] - The company's growth strategy focuses on polymers, offering five best-in-class technologies for every step in the product lifecycle, with a goal to shift towards more manufacturing application solutions and invest in new applications and materials[206] - The J55 3D printer is priced at about one-third of the J8 Series printers, offering nearly 600,000 colors and multi-material capabilities[217] - The J5 DentaJet™ and J5 MediJet™ are industry-specific versions of the J55 3D printer, targeting dental and medical applications respectively[218] - The Stratasys J850 Digital Anatomy™ printer uses three new materials (GelMatrix™, TissueMatrix™, BoneMatrix™) to create over 100 unique digital materials for anatomical applications[219] - Stratasys' FDM printer portfolio has reached a milestone of 35,000 installed printers, with models like the F170, F370, F770, F190CR, and F370CR[220] - The F Series printers introduced in 2022, including the F190CR and F370CR, can print Nylon 10CF for manufacturing floor jigs and fixtures[221] - The Stratasys F900 3D printer includes an internal camera and GrabCAD Print software, streamlining workflow and job monitoring[223] - The Neo800 stereolithography printer features a build volume of 31.5 x 31.5 x 23.6 inches, with the Neo450s and 450e models catering to smaller build needs[224] - The H350 SAF technology-based 3D printer, shipped globally in 2022, is designed for industries like automotive and consumer goods, offering predictable cost per part[227] - Stratasys' GrabCAD Additive Manufacturing Platform processes 35 gigabytes of data streams daily, with over 42,200 application users and 19,000 3D printers connected as of February 2023[238] - The GrabCAD Community has over 13 million members and 1.7 million CAD files available for free download as of the end of 2022[242] Customer and Market Reach - The company has over 300,000 Stratasys parts already in use in the aerospace industry and supports multiple materials for biocompatible applications in healthcare[171] - The company's network includes over 200 channel partners, exclusive to its technologies, covering every region and major market[172] - The company signed a $20 million contract with the U.S. Navy in 2021 for systems, materials, support, and training across multiple global locations[172] - The company has over 2,000 employees worldwide and operates one of the largest additive manufacturing service bureaus in the United States[174] - The company's customer base includes prominent companies such as General Motors, BAE Systems, Boeing, Blue Origin, the U.S. Navy, and the Mayo Clinic, with no single customer accounting for more than 5% of sales in recent years[249] - The company's sales organization is divided into geographical regions: Americas, Europe and Middle East, North Asia, and South Asia, with sales and service centers in key locations worldwide[255] Research and Development - The company has an ongoing R&D program focused on developing new systems, materials, and software, with significant resources devoted to creating a universally compatible and user-friendly software system[266] - The company's R&D department is organized by scientific disciplines and product lines, aiming to standardize product platforms for faster and more cost-effective development[267] - Net R&D expenses were $92.9 million, $88.3 million, and $84.0 million for the years ended December 31, 2022, 2021, and 2020, respectively[268] - The company holds patents related to FDM systems, PolyJet technologies, 3D printing processes, and consumables, with expiration dates ranging from 2023 to 2039[269] - The company has a cross-license agreement with 3D Systems Corporation and a patent license agreement with Cornell University[270] Competitive Landscape - The company's principal competitors include 3D Systems Corporation, EOS GmbH, HP, Carbon, Inc., Formlabs, Markforged, Inc., and Desktop Metal[272] - The company's competitive strengths include material properties of printed objects, quality of printed objects, multiple production-grade modeling materials, and multi-color, multi-material 3D printing systems[273] Seasonality and Regulatory Compliance - The company experiences seasonality, with stronger demand in the fourth quarter and weaker demand in the first and third quarters[275] - The company is subject to medical device regulations, such as the U.S. FDA Code of Federal Regulations, following the launch of its first certified medical device with TrueDent resin[280] Sustainability and Corporate Responsibility - The company prioritizes four UN Sustainable Development Goals: responsible consumption and production, industry infrastructure and innovation, climate action, and quality education[281] - The company aims to improve the circular economy and reduce the carbon footprint of its products, including offering recycling options and naturally sourced printing materials[282] - The company has set an initial baseline for Scope 1 & 2 emissions and is working to improve its environmental impact, including installing solar panels at manufacturing sites[285] Corporate Governance and Structure - Total number of directors is 8, with 2 female and 6 male directors[292] - The company owns a 46.5% interest in Ultimaker, which includes the operations of its former subsidiary, MakerBot[324] - The company's Eden Prairie, Minnesota headquarters encompasses approximately 308,646 square feet, with 227,100 square feet owned by the company[326] - The company entered into a new lease of an additional 168,100 square feet for storage purposes in 2022, increasing shipping efficiency and reducing inventory management costs[326] - The company's Rehovot, Israel headquarters encompasses approximately 284,713 square feet, housing research and development facilities and certain marketing activities[326] - The company's corporate structure includes Stratasys Ltd. as the Israeli parent company and several wholly-owned subsidiaries, including Stratasys, Inc., Stratasys Direct, Inc., and Stratasys AP Limited[323] - The company's material tangible fixed assets include properties in Eden Prairie, Minnesota, Rehovot, Israel, and Kiryat Gat, Israel[327] - Americas headquarters in Eden Prairie, Minnesota covers 308,646 square feet[328] - Valencia, California facilities include 55,035 square feet for offices and warehouses[328] - Rehovot, Israel headquarters spans 284,713 square feet, with 92,400 square feet leased to a third party under a long-term lease[328] - Kiryat Gat, Israel facilities include 126,617 square feet for factories and warehouses[328] - Plymouth, Minnesota warehouse occupies 168,100 square feet[328] - Asia Pacific main office in Hong Kong covers 4,994 square feet[328] - Japan sales office spans 13,109 square feet[328] - China sales office covers 15,018 square feet[328] - Other facilities in Asia Pacific include 14,913 square feet of office space[328] - Makerbot's Brooklyn NY facility (36,950 square feet) was removed from the property list as of September 1st[328] Customer Support and Services - The company provides customer support through a global network of Stratasys-certified engineers, direct and indirect support engineers, and resellers, offering services in eight languages and local languages through resellers[243] - The company offers a range of post-warranty maintenance contracts with varying levels of support and pricing, ensuring products are designed for serviceability and incorporating field feedback into product development[245] - The company's 3D printing systems are sold with warranties ranging from 90 days to one year, with extended support programs available for maintenance services beyond the warranty period[246] - The company offers a 'Try and Buy' program allowing businesses to test 3D printers before purchase, with customer support provided during the trial period[247] - Stratasys Direct Manufacturing provides on-demand parts production using polymer 3D printing, with over 30 years of experience and a focus on rapid prototyping and production parts[248] Supply Chain and Inventory Management - The company maintains an inventory of parts for timely assembly, with certain components like PolyJet 3D printing system printer heads supplied by a sole supplier, Ricoh[261]

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2022 was $162.2 million, up 2% year-over-year, and up 7.8% when adjusted for divestitures and at constant currency [21][22] - GAAP gross margin improved to 43.6% from 42.9% year-over-year, while non-GAAP gross margin increased to 48.5% from 48.2% [24] - Non-GAAP operating income for the quarter was $4.5 million, compared to $1.8 million in the same period last year, reflecting improved operational efficiency [25] Business Line Data and Key Metrics Changes - OEM business revenue grew approximately 10% year-over-year at constant currency, with system revenue increasing by 18.9% adjusted for FX and divestitures [10][21] - Product revenue rose by 3% to $112.1 million, with system revenue growing by 7.7% to $56.3 million [22] - Consumable revenue declined by 1.4% to $55.8 million, but grew by 3.4% when adjusted for divestitures and at constant currency [22] Market Data and Key Metrics Changes - The market has slowed, resulting in longer sales cycles and occasional deferral of orders, particularly affecting the prototyping business [8][27] - Despite macroeconomic challenges, sectors such as automotive, aerospace, education, and defense are performing well, with Europe showing surprising resilience [36] Company Strategy and Development Direction - The company aims to shift more revenue from prototyping to manufacturing, enhancing its focus on operational efficiencies and cost management [9][10] - Stratasys is expanding its portfolio through acquisitions, such as Covestro's additive manufacturing materials business, to enhance its materials offering and drive growth [12][13] - The company is committed to increasing its addressable market and capturing new use cases across various verticals [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to grow despite current economic challenges, emphasizing the importance of long-term customer relationships [35][71] - The company anticipates continued pressure from macroeconomic factors, including inflation and currency exchange rates, affecting purchasing behavior [27][28] - Future guidance has been adjusted to reflect a more cautious outlook, with expected revenue growth of approximately 10% over 2021 [28] Other Important Information - The company ended the quarter with a strong balance sheet, including $349 million in cash and no debt, positioning it well for future growth opportunities [11][26] - The company is focused on maintaining operational efficiency, with operating expenses as a percentage of revenue improving to 45.8% from 47.1% year-over-year [24][62] Q&A Session Summary Question: Insights on customer purchasing behavior and 2023 budgets - Management noted that while there are delays in purchasing due to economic conditions, long-term plans remain intact, and customers are still interested in additive manufacturing solutions [35][36] Question: Drivers of gross margin improvement - Management highlighted operational efficiencies, increased inventory management, and the divestment of MakerBot as key factors contributing to improved gross margins [37][39] Question: Visibility on guidance reduction - The reduction in guidance was attributed to longer sales cycles and unexpected delays rather than a decrease in demand [41][43] Question: Sustainability of profitability in a challenging environment - Management remains confident in achieving double-digit operating margins in the long term, supported by a strong business model and operational efficiencies [45][46] Question: Performance of new products like Origin and H350 - Both products are meeting expectations, with Origin showing faster adoption due to its ease of use compared to H350 [51][52] Question: Cash flow and inventory management - The decrease in cash was primarily due to M&A activities and increased inventory purchases to support demand, with a focus on maintaining a strong cash position [73][75]

Financial Performance - Total revenue reached $162.2 million, a 2% increase year-over-year, or 7.8% increase adjusted for FX and divestitures[14, 9, 16] - OEM systems revenue grew by 18.9% year-over-year, marking the highest Q3 in six years[9] - Gross profit increased to $70.7 million (GAAP) and $78.7 million (Non-GAAP), with gross margins improving to 43.6% (GAAP) and 48.5% (Non-GAAP)[14] - GAAP operating loss improved from $(21.9) million to $(15.6) million, while Non-GAAP operating income increased from $1.8 million to $4.5 million[14, 25] - GAAP net loss improved from $(18.1) million to $18.7 million, while Non-GAAP net income increased from $0.5 million to $3.3 million[14, 25] Strategic Investments and Acquisitions - Stratasys agreed to acquire Covestro's AM materials business, adding a portfolio of 60 materials and hundreds of patents[10] - A $10 million strategic investment was made in Axial3D to enhance AI-powered algorithms for 3D printing model preparation[12] Product and Material Innovations - New validated industrial materials were introduced for the Origin One 3D printer, including P3 Stretch 475 from Henkel Loctite and P3 Deflect 120 from Evonik[11] - FDA 510(k) clearance was obtained for a revolutionary resin for the J5 DentaJet printer for dentures, targeting a $5 billion addressable market[11] Outlook - The full-year 2022 revenue growth is expected to be approximately 10% year-over-year, adjusted for FX and divestitures, with revenue between $648 million and $652 million[28] - Non-GAAP operating margins are expected to be slightly above 2%, with a long-term target of double-digit margins[28]

Financial Data and Key Metrics - Q2 2022 revenue was $166.6 million, up 13.3% YoY and 16.4% on a constant currency basis [7] - System revenue grew 29.2% YoY to $58.9 million, the highest Q2 total in four years [16] - Consumables revenue increased 3.9% YoY to $56.9 million [16] - Service revenue rose 9% YoY to $50.9 million [16] - GAAP gross margin was 40.5%, down from 43% YoY, while non-GAAP gross margin was 47.6%, flat YoY [17] - GAAP operating loss was $23.5 million, compared to a loss of $22.7 million YoY [18] - Non-GAAP operating income was $1.9 million, compared to a loss of $2.6 million YoY [18] - Adjusted EBITDA was $7.4 million, up from $3.5 million YoY [19] Business Line Performance - System sales growth was driven by the ramp of the Origin One and H350 mass production systems [16] - Dental segment saw strength in the J5 DentaJet line, with an updated version doubling throughput [11] - Medical segment launched radiometric capabilities for the digital anatomy printer, enhancing healthcare applications [12][13] Market Performance - The company expanded its presence in aerospace, automotive, healthcare, and fashion industries [8] - Stratasys became a NASCAR competitive partner and the official 3D printing partner of Toyota Racing Development [9][10] - The company is leveraging its H350 system for automotive parts production, targeting mainstream vehicle production [11] Strategic Direction and Industry Competition - Stratasys is focused on growing its leadership position in polymer additive manufacturing [8] - The company is advancing its materials ecosystem strategy, opening up more automotive use cases [11] - The merger of MakerBot with Ultimaker is expected to close in Q3 2022, with Stratasys holding 45.6% of the combined company [13] Management Commentary on Operating Environment and Future Outlook - The company is operating in a challenging environment with supply chain constraints, inflation, and economic uncertainty [8] - Stratasys expects full-year 2022 revenue in the range of $675 million to $685 million, with growth driven by higher system sales and recurring consumables [20][21] - Long-term, the company targets double-digit non-GAAP operating margins as revenue scales [22] Other Important Information - The company ended Q2 with $441.5 million in cash and equivalents, with no debt [7] - Inventory purchases increased by over $20 million, impacting cash flow in Q2 [19] - The company expects gross margins to rebound above 50% as logistics and material cost pressures ease [21] Q&A Session Summary Question: Demand trends and geographic market performance [27] - Stratasys is seeing strong customer engagement and demand, with a diversified product and geographic portfolio [28][30] Question: Long-term operating margin targets [31] - The company expects to achieve double-digit operating margins through scalability and operational efficiencies, driven by double-digit revenue growth [32][33] Question: Cash flow and inventory investments [35] - Negative cash flow in Q2 was deliberate, aimed at meeting customer demand and improving future gross margins through inventory management [36][37] Question: Revenue growth beyond $700 million and gross margin recovery [38] - Stratasys is confident in surpassing $700 million in revenue, driven by its innovative technologies and material platform [39][40] - Gross margins are expected to recover to 50% within 2-3 years, despite current inflation pressures [52][53] Question: Demand in the dental segment [55] - The company is building a strong dental portfolio, leveraging its technologies and materials expertise [56][57] Question: Service gross margin improvement [59] - Service gross margins improved due to price increases and higher-margin deals [60] Question: MakerBot merger impact [62] - The MakerBot merger is expected to close in Q3 2022, with immaterial revenue impact but a positive effect on margins [63] Question: Supply chain constraints [65] - Supply chain challenges persist, particularly in electronics and raw materials, but the company expects easing by year-end [66][68] Closing Remarks [70] - Stratasys is optimistic about its growth trajectory and ability to create long-term shareholder value [70]