Stratasys(SSYS)2023-03-02 16:00Tax 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]