Cautionary Statement Regarding Forward-Looking Statements

The statements in this press release regarding Stratasys’ strategy, and the statements regarding its projected future financial performance, including the financial guidance concerning its expected results for 2018, are forward-looking statements reflecting management’s current expectations and beliefs. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt change. Due to risks and uncertainties associated with Stratasys’ business, actual results could differ materially from those projected or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to: the degree of market acceptance of our 3D printers, high-performance systems and consumables, and the software and technology included in those systems; potential declines in the demand for, or the prices of, our products and services, or volume of our sales, due to decreased demand either for them specifically or in the 3D printing market generally; potential further charges against earnings that we could be required to take due to impairment of additional goodwill or other intangible assets; potential shifts in our product mix to lower-margin products or in our revenues mix towards our AM services business; any failure to adequately adapt our infrastructure and properly integrate the internal and external sources of our growth to generate intended benefits (including from the companies that we recently acquired); the impact of competition and new technologies; risks related to our relationships with our suppliers, resellers and independent sales agents, and our operations at our manufacturing sites; risks related to the international scope of our operations and regulatory compliance (including reporting, environmental, anti-corruption and other regulatory compliance) related to that scope of operations; risks related to the security of our information systems (including risks related to potential cyber-attacks); changes in the overall global economic environment or in political and economic conditions in the countries in which we operate; changes in our strategy; costs and potential liability relating to litigation and regulatory proceedings; and those additional factors referred to in Item 3.D “Key Information - Risk Factors”, Item 4, “Information on the Company”, Item 5, “Operating and Financial Review and Prospects,” and all other parts of our Annual Report on Form 20-F for the year ended December 31, 2017 (the “2017 Annual Report”), which report is being filed with the Securities and Exchange Commission (the “SEC”) on the same day on which this press release is being issued. Readers are urged to carefully review and consider the various disclosures made throughout our 2017 Annual Report and our other reports filed with or furnished to the SEC, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Any guidance provided, and other forward-looking statements made, in this press release are made as of the date hereof, and Stratasys 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.

Use of non-GAAP financial measures

The non-GAAP data included herein, which excludes certain items as described below, are non-GAAP financial measures. Our management believes that these non-GAAP financial measures are useful information for investors and shareholders of our Company in gauging our results of operations (x) on an ongoing basis after excluding merger and acquisition related expense and reorganization-related charges, and (y) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, impairment of goodwill and other long-lived assets, changes in fair value of obligations in connection with acquisitions and the corresponding tax effect of those items. We also exclude, when applicable, non-recurring changes of non-cash valuation allowance on deferred tax assets, as well as, non-recurring significant tax charges or benefits that relate to prior periods which we do not believe are reflective of ongoing business and operating results. These non-GAAP adjustments either do not reflect actual cash outlays that impact our liquidity and our financial condition or have a non-recurring impact on the statement of operations, as assessed by management. These non-GAAP financial measures are presented to permit investors to more fully understand how management assesses our performance for internal planning and forecasting purposes. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all items indicated above during a period, which may not provide a comparable view of our performance to other companies in our industry. Investors and other readers should consider non-GAAP measures only as supplements to, not as substitutes for or as superior measures to, the measures of financial performance prepared in accordance with GAAP. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table below.

Stratasys Ltd.
Consolidated Balance Sheets
(in thousands, except share data)
				December 31,				December 31,
				2017				2016
ASSETS
Current assets
Cash and cash equivalents				$	328,761			$	280,328
Accounts receivable, net					132,671				120,411
Inventories					115,717				117,521
Net investment in sales-type leases					7,208				11,717
Prepaid expenses					7,696				7,571
Other current assets					22,858				15,491
Total current assets					614,911				553,039
Non-current assets
Net investment in sales-type leases - long term					4,439				12,126
Property, plant and equipment, net					199,951				208,415
Goodwill					387,108				385,629
Other intangible assets, net					142,122				177,458
Other non-current assets					31,219				29,382
Total non-current assets					764,839				813,010
Total assets				$	1,379,750			$	1,366,049
LIABILITIES AND EQUITY
Current liabilities
Accounts payable				$	39,849			$	40,933
Current portion of long term-debt					5,143				3,714
Accrued expenses and other current liabilities					30,041				32,207
Accrued compensation and related benefits					35,356				34,186
Obligations in connection with acquisitions					-				3,619
Deferred revenues					52,908				49,952
Total current liabilities					163,297				164,611
Non-current liabilities
Long-term debt					27,143				22,286
Deferred tax liabilities					7,069				5,952
Deferred revenues - long-term					15,200				12,922
Other non-current liabilities					32,899				22,251
Total non-current liabilities					82,311				63,411
Total liabilities					245,608				228,022
Redeemable non-controlling interests					1,635				2,029
Equity
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 53,631 thousands shares and 52,639 thousands shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively					145				142
Additional paid-in capital					2,663,274				2,633,129
Accumulated other comprehensive loss					(7,023	)			(13,479	)
Accumulated deficit					(1,523,906	)			(1,483,925	)
Equity attributable to Stratasys Ltd.					1,132,490				1,135,867
Non-controlling interest					17				131
Total equity					1,132,507				1,135,998
Total liabilities and equity				$	1,379,750			$	1,366,049

Stratasys Ltd.
Consolidated Statements of Operations
(in thousands, except per share data)
			Three Months Ended December 31,								Twelve Months Ended December 31,
			2017				2016				2017				2016
			(unaudited)				(unaudited)
Net sales
Products			$	129,777			$	126,556			$	474,286			$	479,031
Services				49,566				48,747				194,076				193,427
				179,343				175,303				668,362				672,458
Cost of sales
Products				59,977				61,970				219,020				234,653
Services				32,100				30,409				126,565				120,499
				92,077				92,379				345,585				355,152
Gross profit				87,266				82,924				322,777				317,306
Operating expenses
Research and development, net				26,585				24,304				96,237				97,778
Selling, general and administrative				66,657				88,773				255,685				307,113
Change in the fair value of obligations in connection with acquisitions				-				(988	)			1,378				(872	)
				93,242				112,089				353,300				404,019
Operating loss				(5,976	)			(29,165	)			(30,523	)			(86,713	)
Financial income (expense), net				667				(862	)			1,047				354
Loss before income taxes				(5,309	)			(30,027	)			(29,476	)			(86,359	)
Income tax expenses				4,068				(15,729	)			9,273				(9,446	)
Share in losses of associated companies				(704	)			(526	)			(1,710	)			(708	)
Net loss				(10,081	)			(14,824	)			(40,459	)			(77,621	)
Net loss attributable to non-controlling interest				(101	)			(63	)			(478	)			(402	)
Net loss attributable to Stratasys Ltd.			$	(9,980	)		$	(14,761	)		$	(39,981	)		$	(77,219	)
Net loss per ordinary share attributable to Stratasys Ltd.
Basic			$	(0.19	)		$	(0.28	)		$	(0.75	)		$	(1.48	)
Diluted				(0.19	)			(0.30	)			(0.75	)			(1.48	)
Basic				53,356				52,620				52,959				52,330
Diluted				53,356				52,784				52,959				52,582

Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Results of Operations
					Three Months Ended December 31,
					2017				Non-GAAP				2017			2016				Non-GAAP				2016
					GAAP				Adjustments				Non-GAAP			GAAP				Adjustments				Non-GAAP
					U.S. dollars and shares in thousands (except per share amounts)
			Gross profit (1)		$	87,266			$	6,864			$	94,130		$	82,924			$	11,093			$	94,017
			Operating income (loss) (1,2)			(5,976	)			19,518				13,542			(29,165	)			40,733				11,568
			Net income (loss) attributable to Stratasys Ltd. (1,2,3)			(9,980	)			18,429				8,449			(14,761	)			22,588				7,827
			Net income (loss) per diluted share attributable to Stratasys Ltd. (4)		$	(0.19	)		$	0.35			$	0.16		$	(0.30	)		$	0.45			$	0.15
(1)			Acquired intangible assets amortization expense							5,687											10,394
			Non-cash stock-based compensation expense							497											648
			Impairment charges of other intangible assets							646											-
			Reorganization and other related costs							34											276
			Merger and acquisition related expense							-											(225	)
										6,864											11,093
(2)			Acquired intangible assets amortization expense							2,594											3,822
			Non-cash stock-based compensation expense							3,092											4,238
			Impairment charges of intangible assets and other long lived assets							3,742											21,774
			Change in fair value of obligations in connection with acquisitions							-											(988	)
			Reorganization and other related costs							3,136											251
			Merger and acquisition related expense							90											543
										12,654											29,640
										19,518											40,733
(3)			Corresponding tax effect							(1,295	)										(18,355	)
			Amortization expense of associated company							206											210
									$	18,429										$	22,588
(4)			Weighted average number of ordinary shares outstanding- Diluted			53,356								53,584			52,784								53,255

Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Results of Operations
				Twelve Months Ended December 31,
				2017				Non-GAAP				2017			2016				Non-GAAP				2016
				GAAP				Adjustments				Non-GAAP			GAAP				Adjustments				Non-GAAP
				U.S. dollars and shares in thousands (except per share amounts)
		Gross profit (1)		$	322,777			$	26,860			$	349,637		$	317,306			$	50,334			$	367,640
		Operating income (loss) (1,2)			(30,523	)			67,226				36,703			(86,713	)			115,729				29,016
		Net income (loss) attributable to Stratasys Ltd. (1,2,3)			(39,981	)			64,158				24,177			(77,219	)			91,989				14,770
		Net income (loss) per diluted share attributable to Stratasys Ltd. (4)		$	(0.75	)		$	1.20			$	0.45		$	(1.48	)		$	1.76			$	0.28
(1)		Acquired intangible assets amortization expense							22,768											41,712
		Non-cash stock-based compensation expense							2,581											2,780
		Impairment charges of other intangible assets							646											1,779
		Reorganization and other related costs							337											3,846
		Merger and acquisition related expense							528											217
									26,860											50,334
(2)		Acquired intangible assets amortization expense							10,319											14,901
		Non-cash stock-based compensation expense							15,141											17,993
		Impairment charges of intangible assets and other long-lived assets							3,742											21,774
		Change in fair value of obligations in connection with acquisitions							1,378											(872	)
		Reorganization and other related costs							5,803											3,671
		Merger and acquisition related expense							3,983											7,928
									40,366											65,395
									67,226											115,729
(3)		Corresponding tax effect							(3,866	)										(24,233	)
		Amortization expense of associated company							798											493
								$	64,158										$	91,989
(4)		Weighted average number of ordinary shares outstanding- Diluted			52,959								53,536			52,582								53,201

Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
Fiscal Year 2018
(in millions, except per share data)
GAAP net loss					($41) to ($25)
Adjustments
Stock-based compensation expense					$17 to $19
Intangible assets amortization expense					$32 to $34
Reorganization and other related costs					$7 to $9
Tax expense related to Non-GAAP adjustments					($4) to ($5)
Non-GAAP net income					$16 to $27
GAAP loss per share					($0.75) to ($0.46)
Non-GAAP diluted earnings per share					$0.30 to $0.50

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