Fourth Quarter Operating Profit Increases 45% on Record Revenue

MINNEAPOLIS — (BUSINESS WIRE) — February 7, 2012 — Stratasys, Inc. (NASDAQ: SSYS) today announced fourth quarter and full year financial results.

The company reported record revenue of $43.6 million for the fourth quarter ended December 31, 2011, a 28% increase from the $34.0 million for the same period last year.

System shipments totaled 700 units for the fourth quarter of 2011, compared to 632 units for the same period last year.

The company reported net income of $5.8 million for fourth quarter, or $0.27 per share, representing a 34% increase over the net income of $4.3 million, or $0.20 per share, for the same period last year.

Non-GAAP net income was $6.6 million for the fourth quarter, or $0.31 per share, representing a 49% increase over the non-GAAP net income of $4.4 million, or $0.21 per share, for the same period last year.

Solidscape Inc., acquired by Stratasys in May of 2011, contributed $3.2 million to revenue and 68 system sales, and was accretive to net income during the fourth quarter of 2011.

The company reported revenue of $155.9 million for the twelve-month period ended December 31, 2011, compared to $117.8 million for the same period in 2010.

The twelve-month period in 2010 included a $5.0 million one-time non-cash charge against revenue. The charge against revenue was taken in the first quarter of 2010 and represents the fair value of a warrant issued to HP in connection with a distribution agreement signed in January 2010. Excluding this charge, total revenue increased by 27% in 2011 over the same period last year.

System shipments totaled 2,602 units for the twelve-month period in 2011, compared to 2,555 units for the same period last year.

The company reported net income of $20.6 million for the twelve-month period, or $0.95 per share, compared to net income of $9.4 million, or $0.44 per share, for the same period last year.

Non-GAAP net income was $22.5 million or $1.04 per share for the twelve-month period of 2011, compared to non-GAAP net income of $13.4 million, or $0.63 per share, for the same period last year.

Solidscape Inc. contributed $8.2 million in revenue and 174 system sales, and was accretive to net income for 2011.

Appropriate reconciliations between GAAP and non-GAAP financial measures are provided in a table at the end of this press release. The table provides itemized detail of the non-GAAP financial measures.

“The fourth quarter represented a strong finish to 2011,” said Scott Crump, chairman and chief executive officer of Stratasys. “The quarter and full year results are record performances for both revenue and operating profit. The sales momentum was particularly strong during the final weeks of the year, resulting in a record year-end backlog, which includes over $12 million in system orders. Consequently, we are well positioned as we begin 2012.

“As in previous quarters, the fourth quarter benefited from sales of our Fortus 3D production systems. Fortus system revenue grew by nearly 80% during the quarter when compared to the same period last year, with particularly strong sales from our highest-margin systems. The growing demand for functional prototypes and DDM [Direct Digital Manufacturing] applications within the aerospace, automotive and defense industries remain the primary drivers behind this growth.

“Consumable revenue reached the highest level in our company’s history during the fourth quarter, growing by 25% over last year. Our expanding base of Fortus 3D production systems and the higher material usage rates generated by DDM applications is driving this growth. In addition, consumable usage is benefitting from a growing demand for our innovative new materials. We expect these positive trends will continue throughout 2012.

“Revenue within our RedEye paid parts business also represented a record level, expanding by 17% over the fourth quarter last year. Our RedEye business continues to benefit from customers accessing our significant capacity for large orders, as well as our ability to produce large parts made of high-grade thermoplastics.

“We are also making progress in our channel development programs aimed at accelerating the sales of our uPrint 3D printer line. This includes recruiting and training 90 new agents by the beginning of the second quarter of this year that will focus exclusively on selling our most affordable products. We expect this new initiative will drive incremental new volume starting in the second quarter.

“In addition to expanding our channel, we are raising the incentive for selling our most affordable 3D printers. Beginning late in the fourth quarter, distributor margin for the uPrint line was increased substantially. We believe the new incentive structure will drive incremental focus on selling the uPrint line, and combined with the expansion of our sales channel, will bode well for 3D printer sales in the coming months.