Stratasys Releases Fourth Quarter and Full Year 2018 Financial Results – Updated to Include Guidance Clarification

Please replace the release with the following corrected version to add clarification to the “Financial Guidance” section.

The corrected release reads:

STRATASYS RELEASES FOURTH QUARTER AND FULL YEAR 2018 FINANCIAL RESULTS “ UPDATED TO INCLUDE GUIDANCE CLARIFICATION

Fourth Quarter Revenue of $177.1 million and $663.2 million for full year 2018

Fourth Quarter GAAP net income of $6.3 million, or $0.12 per diluted share, and non-GAAP net income of $11.3 million, or $0.21 per diluted share

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Generated $18.7 million of cash from operations during the quarter, and a record $63.7 million in cash from operations in full year 2018

Company releases full year 2019 earnings guidance

Stratasys Ltd. (NASDAQ: SSYS) announced financial results for the fourth quarter and full year of 2018.

Q4 2018 Financial Results Summary:

Revenue for the fourth quarter of 2018 was $177.1 million, compared to $179.3 million for the same period last year.

  • GAAP gross margin was 49.1% for the quarter, compared to 48.7% for the same period last year.
  • Non-GAAP gross margin was 52.2% for the quarter, compared to 52.5% for the same period last year.
  • GAAP operating loss for the quarter was $3.8 million, compared to operating loss of $6.0 million for the same period last year.
  • Non-GAAP operating income for the quarter was $12.8 million, compared to operating income of $13.5 million for the same period last year.
  • GAAP net income for the quarter was $6.3 million, or $0.12 per diluted share, compared to a net loss of $10.0 million, or ($0.19) per diluted share, for the same period last year.
  • Non-GAAP net income for the quarter was $11.3 million, or $0.21 per diluted share, compared to Non-GAAP net income of $8.4 million, or $0.16 per diluted share, reported for the same period last year.
  • The Company generated $18.7 million in cash from operations during the fourth quarter and ended the period with $393.2 million in cash and cash equivalents.

We are pleased with our fourth quarter and full year profitability, and finished 2018 with record cash flow from operations as we continue to build a strong operational foundation for future growth opportunities and to invest in accelerating new product introductions to expand our addressable markets, said Elchanan (Elan) Jaglom, Interim Chief Executive Officer of Stratasys. Our consolidated top line results this quarter reflect continued positive traction in high-end system and materials sales for our PolyJet and FDM technology platforms, primarily in North America, offset partially by the impact late in the quarter of the government shutdown in the United States and what we believe is temporary weakness in the Automotive sector in Europe.

Fiscal 2018 Financial Results Summary:

  • Revenue for fiscal 2018 was $663.2 million compared to $668.4 million for fiscal 2017.
  • GAAP operating loss for fiscal 2018 was $8.8 million, compared to a loss of $30.5 million for fiscal 2017.
  • Non-GAAP operating income for fiscal 2018 was $36.5 million, compared to $36.7 million for fiscal 2017.
  • GAAP net loss for fiscal 2018 was $11.0 million, or ($0.22) per diluted share, compared to a loss of $40.0 million, or ($0.75) per diluted share, for fiscal 2017.
  • Non-GAAP net income for fiscal 2018 was $27.8 million, or $0.52 per diluted share, compared to non-GAAP net income of $24.2 million, or $0.45 per diluted share, reported for fiscal 2017.
  • The Company generated a record $63.7 million in cash from operations in fiscal 2018.

Financial Guidance:

Stratasys today provided the following information regarding the Companys guidance for projected revenue and net income for the fiscal year ending December 31, 2019:

  • Revenue guidance of $670 to $700 million.
    • As the Company stated on the earnings call today, revenue is expected to grow during the first half of 2019, excluding the impact of 2018 divestitures. The Company clarifies that it expects the 2nd half of 2019 will represent 51%-53.5% of the 2019 revenue. Revenue is subject to the variability that may be caused by the shifting of large orders.
  • GAAP net loss of $22 to $12 million, or ($0.40) to ($0.22) per diluted share.
  • Non-GAAP net income of $30 to $38 million, or $0.55 to $0.70 per diluted share.

Stratasys also provided the following guidance regarding the Companys projected performance and strategic plans for 2019:

  • Non-GAAP operating margins of 5.5% to 6.5%.
  • Capital expenditures are projected at $45 to $60 million.

Given the expected ongoing negative impact of not recording a tax benefit on U.S. tax losses on the Companys non-GAAP net income, the Company believes that the rate of growth in its non-GAAP operating income is the best measure of its performance.

Non-GAAP earnings guidance excludes $32 million of projected amortization of intangible assets; $20 to $22 million of share-based compensation expense; reorganization related and other expense of $1 to $2 million; and includes ($3) to ($4) million in tax expenses related to non-GAAP adjustments.

We are entering into 2019 with an impressive roadmap of new technology and products, and continued, steady progress in customer adoption of our additive manufacturing solutions for advanced applications in our target verticals of aerospace, automotive, healthcare, and high-realism rapid prototyping, continued Jaglom. We are excited about our recent and upcoming new product introductions and believe that we will see accelerated growth beginning in 2020.

Stratasys Ltd. Q4 2018 Conference Call Details

The Company plans to hold the conference call to discuss its third quarter financial results on Thursday, March 7, 2019 at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the Stratasys Web site at www.stratasys.com under the “Investors” tab; or directly at the following web address: https://edge.media-server.com/m6/p/znvsr248.

To participate by telephone, the domestic dial-in number is (866) 394-5776 and the international dial-in is (409) 350-3596. The access code is 2462328.

Investors are advised to dial into the call at least ten minutes prior to the call to register. The webcast will be available for 90 days on the “Investors” page of the Stratasys Website or by accessing the provided web address.

Stratasys is a global leader in additive manufacturing or 3D printing technology, and is the manufacturer of FDM and PolyJet„¢ 3D Printers. The Companys technologies are used to create prototypes, manufacturing tools, and production parts for industries, including aerospace, automotive, healthcare, consumer products and education. For 30 years, Stratasys products have helped manufacturers reduce product-development time, cost, and time-to-market, as well as reduce or eliminate tooling costs and improve product quality. The Stratasys 3D printing ecosystem of solutions and expertise includes: 3D printers, materials, software, expert services, and on-demand parts production. Online at: www.stratasys.com, http://blog.stratasys.com and LinkedIn.

Stratasys is a registered trademark and the Stratasys signet is a trademark of Stratasys Ltd. and/or its subsidiaries or affiliates. All other trademarks are the property of their respective owners.

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 2019, 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 shifts in our product mix to lower-margin products or in our revenues mix towards our AM services business; potential further charges against earnings that we could be required to take due to impairment of additional goodwill or other intangible assets; potential failure to successfully consummate acquisitions or investments in new businesses, technologies, products or services; 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, 2018 (the 2018 Annual Report), filed with the Securities and Exchange Commission (the SEC) on March 7th, 2019. Readers are urged to carefully review and consider the various disclosures made throughout our 2018 Annual Report that attaches Stratasys unaudited, condensed consolidated financial statements as of, and for the quarter and full year ended, December 31, 2018, and its review of its results of operations and financial condition for those periods, 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, changes in fair value of obligations in connection with acquisitions 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
 
(in thousands, except share data)
  December 31,   December 31,

2018

  2017
 
ASSETS
 

Current assets

Cash and cash equivalents $ 393,167 $ 328,761
Accounts receivable, net 138,146 132,671
Inventories 123,524 115,717
Net investment in sales-type leases 2,658 7,208
Prepaid expenses 6,398 7,696
Other current assets  

20,278

    22,858  
 
Total current assets   684,171     614,911  
 

Non-current assets

Net investment in sales-type leases – long term 1,552 4,439
Property, plant and equipment, net 188,150 199,951
Goodwill 385,849 387,108
Other intangible assets, net 107,274 142,122
Other non-current assets   21,258     31,219  
 
Total non-current assets   704,083     764,839  
 
Total assets $ 1,388,254   $ 1,379,750  
 

LIABILITIES AND EQUITY

 
Current liabilities
Accounts payable $ 45,855 $ 39,849
Current portion of long term-debt 5,143 5,143
Accrued expenses and other current liabilities 39,115 30,041
Accrued compensation and related benefits 31,703 35,356
Deferred revenues   53,965     52,908  
 
Total current liabilities   175,781     163,297  
 
Non-current liabilities
Long-term debt 22,000 27,143
Deferred tax liabilities 1,662 7,069
Deferred revenues – long-term 18,422 15,200
Other non-current liabilities   27,422     32,899  
 
Total non-current liabilities   69,506     82,311  
 
Total liabilities   245,287     245,608  
 

Redeemable non-controlling interests

852 1,635
 
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 53,881 thousands shares and 53,631 thousands shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively

146

145

Additional paid-in capital 2,681,048

2,663,274

Accumulated other comprehensive loss (7,753 ) (7,023 )
Accumulated deficit   (1,531,326 )   (1,523,906 )
Equity attributable to Stratasys Ltd. 1,142,115 1,132,490
Non-controlling interest 17
 
Total equity   1,142,115     1,132,507  
 
Total liabilities and equity $ 1,388,254   $ 1,379,750  
 
 
Stratasys Ltd.
 
Consolidated Statements of Operations
 
(in thousands, except per share data)
   
Three Months Ended December 31, Twelve Months Ended December 31,
2018   2017 2018   2017
   

Net sales

Products $ 124,537 $ 129,777 $ 456,504 $ 474,286
Services   52,582     49,566     206,733     194,076  
177,119 179,343 663,237 668,362
 
Cost of sales
Products 56,502 59,977 203,622 219,020
Services   33,618     32,100     134,391     126,565  
90,120 92,077 338,013 345,585
       
Gross profit 86,999 87,266 325,224 322,777
 
Operating expenses
Research and development, net 24,379 26,585 98,964 96,237
Selling, general and administrative   66,423     66,657     235,107     257,063  
90,802 93,242 334,071 353,300
       
Operating loss (3,803 ) (5,976 ) (8,847 ) (30,523 )
 
Financial income, net 747 667 633 1,047
       
Loss before income taxes (3,056 ) (5,309 ) (8,214 ) (29,476 )
 
Income taxes expense 3,626 4,102 4,736 9,273
 
Share in profits (losses) of associated companies   12,910     (704 )   1,725     (1,710 )
 
Net income (loss) 6,228 (10,081 ) (11,225 ) (40,459 )
 
Net loss attributable to non-controlling interest (79 ) (101 ) (261 ) (478 )
 
Net loss attributable to Stratasys Ltd. $ 6,307   $ (9,980 ) $ (10,964 ) $ (39,981 )
 
Net loss per ordinary share attributable to Stratasys Ltd.
Basic $ 0.12 $ (0.19 ) $ (0.22 ) $ (0.75 )
Diluted 0.12 (0.19 ) (0.22 ) (0.75 )
 
 
Basic 53,854 53,356 53,751 52,959
Diluted 54,132 53,356 53,751 52,959
 
 
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
   
Three Months Ended December 31,
2018     Non-GAAP     2018     2017     Non-GAAP     2017

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

U.S. dollars and shares in thousands (except per share amounts)
 
Gross profit (1) $ 86,999 $ 5,499 $ 92,498 $ 87,266 $ 6,864 $ 94,130
Operating income (loss) (1,2) (3,803 ) 16,574 12,771 (5,976 ) 19,518 13,542

Net income (loss) attributable to Stratasys Ltd. (1,2,3)

6,307 4,993 11,300 (9,980 ) 18,429 8,449

Net income (loss) per diluted share attributable to Stratasys Ltd. (4)

$ 0.12 $ 0.09 $ 0.21 $ (0.19 ) $ 0.35 $ 0.16
 
 
(1) Acquired intangible assets amortization expense 5,221 5,687
Non-cash stock-based compensation expense 294 497
Impairment charges of other intangible assets 646
Reorganization and other related costs   (16 )   34  
5,499 6,864
 
(2) Acquired intangible assets amortization expense 2,532 2,594
Non-cash stock-based compensation expense 3,686 3,092

Impairment charges of intangible assets and other long lived assets

4,797

3,742

Reorganization and other related costs 60 3,136
Merger and acquisition related expense       90  
  11,075     12,654  
  16,574     19,518  
 
 
(3) Corresponding tax effect 1,853 (1,295 )

Gain from equity method divestment, related write-offs and amortization

 

(13,434

)

 

206

 
$ 4,993   $ 18,429  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

54,132 54,132 53,356 53,584
 
 
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
   
Twelve Months Ended December 31,
2018     Non-GAAP     2018     2017     Non-GAAP     2017

GAAP

Adjustments

Non-GAAP

GAAP

Adjustments

Non-GAAP

U.S. dollars and shares in thousands (except per share amounts)
 
Gross profit (1) $ 325,224 $ 22,351 $ 347,575 $ 322,777 $ 26,860 $ 349,637
Operating income (loss) (1,2) (8,847 ) 45,324 36,477 (30,523 ) 67,226 36,703

Net income (loss) attributable to Stratasys Ltd. (1,2,3)

(10,964 ) 38,782 27,818 (39,981 ) 64,158 24,177

Net income (loss) per diluted share attributable to Stratasys Ltd. (4)

 

$ (0.22 ) $ 0.74 $ 0.52 $ (0.75 ) $ 1.20 $ 0.45
 
 
(1) Acquired intangible assets amortization expense 20,866 22,768
Non-cash stock-based compensation expense 1,474 2,581
Impairment charges of other intangible assets 646
Reorganization and other related costs 11 337
Merger and acquisition related expense       528  
22,351 26,860
 
(2) Acquired intangible assets amortization expense 10,161 10,319

Impairment charges of intangible assets and other long-lived assets

4,797

3,742

Non-cash stock-based compensation expense 14,212 15,141
Gain from divestiture, net of transaction costs (7,016 )

Change in fair value of obligations in connection with acquisitions

1,378

Reorganization and other related costs 691 5,803
Merger and acquisition related expense   128     3,983  
  22,973     40,366  
  45,324     67,226  
 
 
(3) Corresponding tax effect (808 ) (3,866 )

Gain from equity method divestment, related write-offs and amortization

 

(5,734

)

 

798

 
$ 38,782   $ 64,158  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

53,751 53,898 52,959 53,536
 
 

Stratasys Ltd.

 
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
 
Fiscal Year 2019
 
(in millions, except per share data)
 
 
GAAP net loss   ($22) to ($12)
 

Adjustments

Stock-based compensation expense $20 to $22
Intangible assets amortization expense $32
Reorganization Related Expense $1 to $2

Tax expense (Income) related to Non-GAAP adjustments

($4) to ($3)

 
Non-GAAP net income $30 to $38
 
GAAP diluted loss per share ($0.40) to ($0.22)
 
Non-GAAP diluted earnings per share $0.55 to $0.70
 

Stratasys Investor Relations
Yonah Lloyd
Vice President
– Investor Relations
[email protected]