Stratasys Reports First Quarter Financial Results

® and PolyJet^TM 3D Printing technologies produce prototypes and manufactured goods directly from 3D CAD files or other 3D content. Systems include 3D printers for personal use, idea development, prototyping and direct digital manufacturing. Stratasys subsidiaries include MakerBot and Solidscape, and the company operates the RedEye digital-manufacturing service. Stratasys has more than 1900 employees, holds more than 550 granted or pending additive manufacturing patents globally, and has received more than 25 awards for its technology and leadership. Online at: www.stratasys.com or http://blog.stratasys.com.


Stratasys Ltd.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended March 31,
	2014			2013
	(unaudited)			(unaudited)
Net sales
Products	$	129,252		$	81,810
Services		21,689			15,397
		150,941			97,207

Cost of sales
Products		61,022			49,043
Services		12,191			10,790
		73,213			59,833

Gross profit		77,728			37,374

Operating expenses
Research and development, net		16,771			10,789
Selling, general and administrative		67,617			43,325
Change in fair value of earn-out obligations		(7,495	)		-
		76,893			54,114

Operating income (loss)		835			(16,740	)

Other income (expense)		(1,336	)		514

Loss before income taxes		(501	)		(16,226	)

Income taxes		(4,588	)		(743	)

Net income (loss)	$	4,087		$	(15,483	)

Net income attributable to non-controlling interest	$	-		$	53

Net income (loss) attributable to Stratasys Ltd.	$	4,087		$	(15,536	)

Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic	$	0.08		$	(0.40	)
Diluted		0.08			(0.40	)

Weighted average ordinary shares outstanding
Basic		49,273			38,494
Diluted		51,240			38,494


Stratasys Ltd.

Condensed Consolidated Balance Sheets

(in thousands)
	March 31,		December 31,
	2014		2013
	(unaudited)
ASSETS

Current assets
Cash and cash equivalents	$	407,168	$	414,088
Short-term bank deposits		200,370		200,370
Accounts receivable, net		106,042		99,200
Inventories		99,783		88,406
Net investment in sales-type leases, net		7,008		6,696
Prepaid expenses		6,444		5,470
Deferred income taxes		19,351		16,501
Other current assets		25,342		21,398

Total current assets		871,508		852,129

Non-current assets
Goodwill		1,196,227		1,195,891
Other intangible assets, net		604,814		622,330
Net investment in sales-type leases		11,797		11,219
Amounts funded in respect of employees rights upon retirement		3,279		3,166
Property, plant and equipment, net		99,146		91,005
Other non-current assets		4,807		6,481

Total non-current assets		1,920,070		1,930,092

Total assets	$	2,791,578	$	2,782,221

LIABILITIES AND EQUITY

Current liabilities
Accounts payable	$	35,056	$	35,375
Accrued expenses and other current liabilities		34,348		32,849
Accrued compensation and related benefits		28,326		21,441
Earn-out obligation		21,530		12,027
Unearned revenues		39,458		36,033

Total current liabilities		158,718		137,725

Non-current liabilities
Employee rights upon retirement		4,811		4,683
Earn-out obligation - long-term		-		16,998
Deferred tax liabilities		102,463		105,901
Unearned revenues - long-term		3,219		3,315
Other non-current liabilities		10,838		13,812

Total liabilities		280,049		282,434

Equity
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 shares; 49,328 and 49,211 shares issued and outstanding
at March 31, 2014 and December 31, 2013, respectively		133		133
Additional paid-in capital		2,420,211		2,412,197
Retained earnings		89,636		85,549
Accumulated other comprehensive income		1,549		1,908

Total equity		2,511,529		2,499,787

Total liabilities and equity	$	2,791,578	$	2,782,221


Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Results of Operations

(in thousands, except per share data)

	Three Months Ended March 31, 2014									Three Months Ended March 31, 2013
	GAAP						Non-GAAP			GAAP						Non-GAAP
	(unaudited)			Adjustments*			(unaudited)			(unaudited)			Adjustments*			(unaudited)
Net sales
Products	$	129,252		$	235		$	129,487		$	81,810		$	1,015		$	82,825
Services		21,689			-			21,689			15,397			-			15,397
		150,941			235			151,176			97,207			1,015			98,222

Cost of sales
Products		61,022			(13,728	)		47,294			49,043			(19,177	)		29,866
Services		12,191			(433	)		11,758			10,790			(343	)		10,447
		73,213			(14,161	)		59,052			59,833			(19,520	)		40,313

Gross profit		77,728			14,396			92,124			37,374			20,535			57,909

Operating expenses
Research and development, net		16,771			(1,496	)		15,275			10,789			(899	)		9,890
Selling, general and administrative		67,617			(13,522	)		54,095			43,325			(15,608	)		27,717
Change in fair value of earn-out obligations		(7,495	)		7,495			-			-			-			-
		76,893			(7,523	)		69,370			54,114			(16,507	)		37,607

Operating income (loss)		835			21,919			22,754			(16,740	)		37,042			20,302

Other income (expense)		(1,336	)		-			(1,336	)		514			-			514

Income (loss) before income taxes		(501	)		21,919			21,418			(16,226	)		37,042			20,816

Income taxes (benefit)		(4,588	)		5,408			820			(743	)		3,886			3,143

Net income (loss)	$	4,087		$	16,511		$	20,598		$	(15,483	)	$	33,156		$	17,673

Net income attributable to non-controlling interest	$	-		$	-		$	-		$	53		$	40		$	93

Net income (loss) attributable to Stratasys Ltd.	$	4,087		$	16,511		$	20,598		$	(15,536	)	$	33,116		$	17,580

Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic	$	0.08					$	0.42		$	(0.40	)				$	0.46
Diluted		0.08						0.40			(0.40	)					0.43

Weighted average ordinary shares outstanding
Basic		49,273						49,273			38,494						38,494
Diluted		51,240						51,240			38,494						41,057


The Company considers these non-GAAP measures to be indicative of its core operating results and facilitates a comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes, however these measures should not be viewed as a substitute for the Company’s GAAP results.

* Refer to the "Reconciliation of Non-GAAP Adjustments" herein for further information regarding adjustments.


Stratasys Ltd.

Reconciliation of Non-GAAP Adjustments

(in thousands)

	Three Months Ended March 31,
	2014			2013
Net sales, products
Deferred revenue purchase price		235			1,015

Cost of sales, products
Acquired intangible assets amortization		(13,225	)		(18,762	)
Non-cash stock-based compensation expense		(503	)		(318	)
Merger and acquisition related expense		-			(97	)
		(13,728	)		(19,177	)
Cost of sales, services
Non-cash stock-based compensation expense		(409	)		(316	)
Merger and acquisition related expense		(24	)		(27	)
		(433	)		(343	)
Research and development, net
Non-cash stock-based compensation expense		(938	)		(899	)
Performance bonus expense		(558	)		-
		(1,496	)		(899	)
Selling, general and administrative
Acquired intangible assets amortization		(5,364	)		(5,461	)
Non-cash stock-based compensation expense		(4,886	)		(3,958	)
Merger and acquisition related expense		(1,484	)		(6,189	)
Performance bonus expense		(1,788	)		-
		(13,522	)		(15,608	)
Change in fair value of earn-out obligation
Change in Earn-out obligation		7,495			-

Income taxes
Tax expense related to non-GAAP adjustments		5,408			3,886

Net income attributable to non-controlling interest
Depreciation and amortization expense attributable to non-controlling interest		-			40

Net income	$	16,511		$	33,116


Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Forward Looking Guidance

Fiscal Year 2014

(in millions, except per share data)

GAAP net income			$10.5 to $19.9

Adjustments
Stock-based compensation expense			$25.1 to $28.2
Intangible assets amortization expense			$64.8
Merger related expense			$8.8 to $9.8

Non-GAAP net income			$113.3 to $118.6

GAAP diluted earnings per share			$0.20 to $0.38

Non-GAAP diluted earnings per share			$2.15 to $2.25

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