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 Performance - Total revenues for the three months ended September 30, 2022, were $162.2 million, a 2% increase from $159.0 million in the same period of 2021[8] - Product revenues for the three months ended September 30, 2022, were $112.1 million, compared to $108.9 million in the same period of 2021, reflecting a 2% increase[8] - Service revenues for the three months ended September 30, 2022, were $50.1 million, slightly down from $50.1 million in the same period of 2021[8] - Gross profit for the three months ended September 30, 2022, was $70.7 million, compared to $68.2 million in the same period of 2021, resulting in a gross margin of approximately 43.5%[8] - Operating loss for the three months ended September 30, 2022, was $(15.6) million, an improvement from $(21.9) million in the same period of 2021[8] - Net income for the three months ended September 30, 2022, was $18.7 million, compared to a net loss of $(18.1) million in the same period of 2021[8] - Total revenues for the nine months ended September 30, 2022, reached $492.2 million, up from $440.2 million in the same period of 2021, indicating a growth of 11.8%[22] Cash and Assets - Cash and cash equivalents as of September 30, 2022, were $150.7 million, down from $243.2 million as of December 31, 2021[5] - Total assets as of September 30, 2022, were $1.27 billion, a slight decrease from $1.28 billion as of December 31, 2021[5] - Total liabilities as of September 30, 2022, were $318.7 million, compared to $321.2 million as of December 31, 2021[6] - Total equity as of September 30, 2022, was $948.7 million, down from $956.0 million as of December 31, 2021[7] - Total cash, cash equivalents, and restricted cash at the end of the period was $150,823, down from $332,988 at the beginning of the period[11] Stock and Compensation - Stock-based compensation for the nine months ended September 30, 2022, amounted to $24,755, an increase from $23,140 in the prior year[11] - Total stock-based compensation expenses for the three months ended September 30, 2022, were $7.391 million, compared to $7.958 million for the same period in 2021[47] - The Company recognized a total of $24.755 million in stock-based compensation expenses for the nine months ended September 30, 2022, up from $23.140 million in the same period in 2021[47] - As of September 30, 2022, the unrecognized compensation cost related to unvested equity-classified stock options was $1.3 million, expected to be recognized over 2.35 years[48] - The unrecognized compensation cost related to unvested RSUs and PSUs was $59 million, expected to be recognized over 2.40 years[51] Acquisitions and Investments - Stratasys' investment in Xaar 3D increased its stake from 15% to 45% for approximately $15.7 million, with a subsequent acquisition of the remaining 55% for $29.3 million[16] - The merger of MakerBot with Ultimaker resulted in a net gain of $39.1 million from the deconsolidation of MakerBot, with Stratasys holding a 46.5% share in the new entity valued at $105.6 million[20] - The acquisition of Covestro's additive manufacturing materials business is expected to close in Q1 2023 for approximately $42.3 million, with potential earn-out payments of up to $36.4 million based on performance metrics[20] - The company’s total assets acquired from the Xaar 3D transaction were valued at $75.7 million, with net assets acquired amounting to $53.1 million[19] - The estimated fair value of contingent consideration for the Xaar 3D acquisition could reach up to $21 million, based on performance metrics[17] Legal and Compliance - The Company is involved in various legal proceedings, but management believes the outcomes will not significantly affect its financial position or cash flows[57] - The Company has a Rights Plan adopted on July 24, 2022, to protect shareholders' interests against potential hostile takeovers[56] Foreign Exchange and Hedging - The Company reported a cash flow hedge net gain of $1.209 million and a foreign currency translation adjustment loss of $15.432 million as of September 30, 2022[53] - The Company had foreign exchange forward contracts designated as cash flow hedges for the conversion of $58.4 million into New Israeli Shekels (NIS) to manage payroll and operating expenses[43] - As of September 30, 2022, the notional amounts of the Company's outstanding exchange forward contracts not designated as hedging instruments were $58.2 million, resulting in a gain of $2.9 million for the three-month period ended September 30, 2022[43] Inventory and Expenses - Inventory as of September 30, 2022, was $170.4 million, an increase from $129.1 million as of December 31, 2021, reflecting a growth of 32.0%[29] - The company incurred approximately $27.4 million in expenses related to intangible assets for the nine months ended September 30, 2022, compared to $23.0 million for the same period in 2021[33] - The estimated amortization expense for intangible assets for the remaining three months of 2022 is projected to be $9.8 million[34] Deferred Revenue and Obligations - Deferred revenues increased to $4,860 for the nine months ended September 30, 2022, compared to $3,470 in the prior year[11] - Remaining Performance Obligations (RPO) totaled $103.6 million as of September 30, 2022, with an expectation to recognize $77.5 million within the next 12 months[26] - Deferred revenue as of September 30, 2022, was $72.3 million, slightly up from $72.3 million as of December 31, 2021[25]

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]

Financial Data and Key Metrics Changes - The company reported revenues of $163.4 million, a 22% increase compared to the prior year quarter, with systems revenue growing by 37% [8][20] - GAAP gross margin was 42.6%, up from 41.4% year-over-year, while non-GAAP gross margin improved to 47.3% from 46.7% [23] - GAAP net loss for the quarter was $20.9 million, or $0.32 per diluted share, compared to a net loss of $18.9 million, also $0.32 per diluted share, in the same period last year [25] Business Line Data and Key Metrics Changes - Product revenue was $113.1 million, a 45.2% increase year-over-year, with system revenue at $54.5 million, up 36.7% [21] - Consumables revenue increased by 16.1% to $58.6 million compared to the same period last year [21] - Service revenue was $50.3 million, a 14.8% increase year-over-year [22] Market Data and Key Metrics Changes - The company expanded its penetration into aerospace, automotive, and fashion applications, with notable partnerships including Lockheed Martin and Radford Motors [9][10] - The company launched a fashion solution with Techstyle, marking its entry into the fashion industry [9] Company Strategy and Development Direction - The company aims to grow its leadership position in polymer 3D printing, focusing on high-volume production systems [8][10] - A new entity was created from MakerBot and Ultimaker to concentrate on industrial and healthcare applications, allowing the company to focus on its core business [10][11] - The company published its inaugural ESG report, outlining its commitment to sustainability and responsible production [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand despite macroeconomic challenges, indicating a robust inventory build to meet this demand [54] - The company expects revenue growth to continue sequentially throughout the year, with the second half anticipated to be stronger than the first half [27] - Management acknowledged potential impacts from global issues such as supply chain constraints and currency fluctuations [27] Other Important Information - The company ended the quarter with over $475 million in cash and no debt, positioning itself well for future opportunities [8][26] - The company plans to launch 16 new materials throughout the year, enhancing its product offerings [62] Q&A Session Summary Question: Are you seeing synergies in your product portfolio? - Management confirmed that the strategy is working well, leveraging infrastructure and technology to capture synergies across customers and technologies [33][34] Question: Can you provide dollar amounts for systems and consumables? - Total system revenue was $64.5 million, and consumables revenue was $58.6 million [38] Question: How are gross margins affected by inflation and supply chain issues? - Gross margins were pressured by approximately 200 basis points due to inflation and material costs, but price increases helped mitigate some of these pressures [41][42] Question: What is the outlook for consumables following strong system sales? - Management expects continued growth in consumables as hardware sales increase, with the highest consumable revenue since Q2 2018 [48] Question: What is the company's strategy for the textile printing market? - The company is targeting the high-end fashion market with its PolyJet technology, focusing on use cases to drive adoption [56][57] Question: What are the geographic trends in demand? - Demand remains strong across all geographies, with particularly strong performance in the EMEA region [67]

Stratasys Ltd. (NASDAQ:SSYS) Q4 2021 Earnings Conference Call February 23, 2022 8:30 AM ET Company Participants Yonah Lloyd - Chief Communications Officer & Vice President of Investor Relations Yoav Zeif - Chief Executive Officer Eitan Zamir - Chief Financial Officer Conference Call Participants Greg Palm - Craig-Hallum Capital Group Troy Jensen - Lake Street Capital Jared Maymon - Berenberg Jim Ricchiuti - Needham & Company Ashley Ellis - Cross Research Paul Chung - JPMorgan Wamsi Mohan - Bank of America A ...