Stratasys Releases Second Quarter 2019 Financial Results

th, 2019. Readers are urged to carefully review and consider the various disclosures made throughout our 2018 Annual Report and the Report of Foreign Private Issuer on Form 6-K that attaches Stratasys’ unaudited, condensed consolidated financial statements as of, and for the quarter and six months ended, June 30, 2019, and its review of its results of operations and financial condition for that period, which has been furnished to the SEC on or about the date hereof, 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 mergers, acquisitions and divestments related expense or gains and reorganization-related charges or gains, and (y) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets, and the corresponding tax effect of those items. 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
(Unaudited)
(in thousands, except share data)
	June 30,			December 31,
	2019			2018

ASSETS

Current assets
Cash and cash equivalents	$	366,327		$	393,167
Accounts receivable, net		131,546			138,146
Inventories		147,799			123,524
Prepaid expenses		8,117			6,398
Other current assets		29,686			22,936

Total current assets		683,475			684,171

Non-current assets
Property, plant and equipment, net		189,794			188,150
Goodwill		385,803			385,849
Other intangible assets, net		96,001			107,274
Operating lease right-of-use assets		23,399			-
Other non-current assets		18,891			22,810

Total non-current assets		713,888			704,083

Total assets	$	1,397,363		$	1,388,254

LIABILITIES AND EQUITY

Current liabilities
Accounts payable	$	54,662		$	45,855
Current portion of long term-debt		-			5,143
Accrued expenses and other current liabilities		29,942			39,115
Accrued compensation and related benefits		29,572			31,703
Deferred revenues		54,298			53,965
Operating lease liabilities - short term		9,106			-

Total current liabilities		177,580			175,781

Non-current liabilities
Long-term debt		-			22,000
Deferred revenues - long-term		16,652			18,422
Operating lease liabilities - long term		14,702			-
Other non-current liabilities		31,409			29,084

Total non-current liabilities		62,763			69,506

Total liabilities		240,343			245,287

Redeemable non-controlling interests		742			852

Equity
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 54,344 thousands shares and 53,881 thousands shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		147			146
Additional paid-in capital		2,695,622			2,681,048
Accumulated other comprehensive loss		(7,047	)		(7,753	)
Accumulated deficit		(1,532,444	)		(1,531,326	)
Total equity		1,156,278			1,142,115

Total liabilities and equity	$	1,397,363		$	1,388,254

Stratasys Ltd.

Consolidated Statements of Operations

(in thousands, except per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales
Products	$	110,341		$	118,403		$	215,432		$	222,320
Services		52,822			51,833			103,031			101,749
		163,163			170,236			318,463			324,069

Cost of sales
Products		47,095			53,262			91,264			98,480
Services		34,901			33,327			69,575			66,292
		81,996			86,589			160,839			164,772

Gross profit		81,167			83,647			157,624			159,297

Operating expenses
Research and development, net		24,040			23,689			46,614			48,799
Selling, general and administrative		56,322			61,887			113,476			118,892
		80,362			85,576			160,090			167,691

Operating profit (loss)		805			(1,929	)		(2,466	)		(8,394	)

Financial income (expense), net		1,755			(83	)		2,508			(75	)

Income (loss) before income taxes		2,560			(2,012	)		42			(8,469	)

Income tax expenses		1,280			205			2,498			806

Share in profits (losses) of associated companies		(195	)		(1,360	)		1,228			(7,433	)

Net income (loss)		1,085			(3,577	)		(1,228	)		(16,708	)

Net loss attributable to non-controlling interests		(67	)		(26	)		(110	)		(116	)

Net income (loss) attributable to Stratasys Ltd.	$	1,152		$	(3,551	)	$	(1,118	)	$	(16,592	)

Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic	$	0.02		$	(0.08	)	$	(0.02	)	$	(0.33	)
Diluted	$	0.02		$	(0.08	)	$	(0.02	)	$	(0.33	)

Basic		54,231			53,722			54,102			53,689
Diluted		54,687			53,722			54,102			53,689

Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Results of Operations
		Three Months Ended June 30,
		2019		Non-GAAP			2019		2018			Non-GAAP			2018
		GAAP		Adjustments			Non-GAAP		GAAP			Adjustments			Non-GAAP
		U.S. dollars and shares in thousands (except per share amounts)

	Gross profit (1)	$	81,167	$	4,441		$	85,608	$	83,647		$	5,708		$	89,355
	Operating income (loss) (1,2)		805		8,246			9,051		(1,929	)		12,548			10,619
	Net income (loss) attributable to Stratasys Ltd. (1,2,3)		1,152		7,372			8,524		(3,551	)		11,643			8,092
	Net income (loss) per diluted share attributable to Stratasys Ltd. (4)	$	0.02	$	0.14		$	0.16	$	(0.08	)	$	0.23		$	0.15


(1)	Acquired intangible assets amortization expense				3,900								5,220
	Non-cash stock-based compensation expense				541								442
	Reorganization and other related costs				-								46
					4,441								5,708

(2)	Acquired intangible assets amortization expense				1,783								2,539
	Non-cash stock-based compensation expense				5,552								3,836
	Reorganization expenses and other				(3,530	)							465
					3,805								6,840
					8,246								12,548


(3)	Corresponding tax effect				(874	)							(1,119	)
	Amortization of acquired intangibles assets related to equity method investments				-								214
				$	7,372							$	11,643

(4)	Weighted average number of ordinary shares outstanding- Diluted		54,687					54,687		53,722						53,745

Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Results of Operations
		Six Months Ended June 30,
		2019			Non-GAAP			2019		2018			Non-GAAP			2018
		GAAP			Adjustments			Non-GAAP		GAAP			Adjustments			Non-GAAP
		U.S. dollars and shares in thousands (except per share amounts)

	Gross profit (1)	$	157,624		$	8,693		$	166,317	$	159,297		$	11,307		$	170,604
	Operating income (loss) (1,2)		(2,466	)		18,321			15,855		(8,394	)		23,935			15,541
	Net income (loss) attributable to Stratasys Ltd. (1,2,3)		(1,118	)		15,299			14,181		(16,592	)		27,406			10,814
	Net income (loss) per diluted share attributable to Stratasys Ltd. (4)	$	(0.02	)	$	0.28		$	0.26	$	(0.33	)	$	0.53		$	0.20


(1)	Acquired intangible assets amortization expense					7,798								10,424
	Non-cash stock-based compensation expense					895								829
	Reorganization and other related costs					-								54
						8,693								11,307

(2)	Acquired intangible assets amortization expense					3,672								5,097
	Non-cash stock-based compensation expense					9,427								6,864
	Reorganization expenses and other					(3,471	)							2,230
	Gain from sale of plant and property					-								(1,563	)
						9,628								12,628
						18,321								23,935


(3)	Corresponding tax effect					(1,418	)							(1,911	)
	Gain from equity method divestment, related write-offs and amortization					(1,604	)							5,382
					$	15,299							$	27,406

(4)	Weighted average number of ordinary shares outstanding- Diluted		54,102						54,585		53,689						53,732

Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Forward Looking Guidance

Fiscal Year 2019

(in millions, except per share data)


GAAP net loss		($17) to ($3)

Adjustments
Stock-based compensation expense		$22 to $24
Intangible assets amortization expense		$23 to $24
Reorganization and other related costs		($1) to $1
Tax expense related to Non-GAAP adjustments		($2) to ($3)

Non-GAAP net income		$30 to $38

GAAP loss per share		($0.31) to ($0.05)

Non-GAAP diluted earnings per share		$0.55 to $0.70

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