Stratasys(US:SSYS)2022-11-10 17:49Financial 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]