Press release from Business Wire
Stratasys Reports Second Quarter Financial Results
<p class=' bwtextaligncenter'> <i><b>Company Achieves Record Consumable Revenue and System Shipments</b></i> </p>
Wednesday, July 28, 2010
Stratasys Reports Second Quarter Financial Results07:30 EDT Wednesday, July 28, 2010 MINNEAPOLIS (Business Wire) -- Stratasys, Inc. (NASDAQ:SSYS) today announced second quarter financial results. The company reported revenue of $30.1 million for the second quarter ended June 30, 2010, a 22% increase over the $24.6 million reported for the same period in 2009. System shipments totaled a record 682 units for the second quarter of 2010, compared to the 442 shipped during the same period last year. The company reported net income of $2.3 million for the second quarter, or $0.11 per share, compared to a net income of $850,000, or $0.04 per share, for the same period last year. Non-GAAP net income, which excludes stock-based compensation expense, was $2.6 million, or $0.12 per share, for the second quarter of 2010 compared to $1.0 million, or $0.05 per share, for the same period last year. Revenue was $53.1 million for the six-month period ended June 30, 2010, compared to $47.8 million reported for the same period in 2009. System shipments totaled a record 1,291 units for the six-month period, a 25% increase over the 1,033 shipped during the same period last year. The six-month period in 2010 included a $5.0 million one-time non-cash charge against revenue. The charge against revenue represents the fair value of a warrant issued to HP (NYSE: HPQ) for 500,000 shares of Stratasys, Inc. common stock, in connection with the distribution agreement signed in January 2010. Non-GAAP revenue for the six-month period, which excludes the warrant charge, was $58.1 million, a 22% increase over the $47.8 million reported for the same period in 2009. Net income was $1.9 million for the six-month period, or $0.09 per share, compared to net income of $146,000, or $0.01 per share for the same period last year. Non-GAAP net income, which excludes the warrant charge, certain discrete items and stock-based compensation expense, was $5.5 million, or $0.26 per share, for the six-month period of 2010 compared to $1.0 million, or $0.05 per share, for the same period last year. 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. “Our strong second quarter results reflect a continuation of the positive trends we observed last quarter, as our core markets are responding favorably to the economic recovery,” said Scott Crump, chairman and chief executive officer of Stratasys. “The second quarter generated record levels of consumable revenue and system unit sales, which increased by 25% and 54% over last year, respectively. In addition, our 3D printer system revenue grew by 56%, and was driven by strong sales of our Stratasys-brand products, as well at the new HP Designjet line. “We are pleased with the progress of our game-changing collaboration with HP, as they began shipping the new Designjet 3D printer line to customers across five European countries during the second quarter. HP's orders for the Designjet line exceeded their original forecast during the second quarter, driven by strong sales to end-users. “While sales to HP during this phase of the agreement remain relatively small as expected, we are seeing the early signs of success, and are cautiously optimistic about the implications for expanding the collaboration in 2011. We are currently preparing for the next phase of the agreement, which includes planning for an expansion in our capacity, as well as a dramatic evolution in our product line. “In a separate agreement, we are pleased to announce that we formally extended our collaboration with an unnamed Fortune 500 partner to develop new platforms for DDM applications. The contract extension includes additional funds to further develop our line of Fortus 3D production systems. We are excited that this industry-leading company shares our vision and recognizes the potential of our FDM technology for manufacturing end-use parts. “We are encouraged by the positive trends in our business during the second quarter, and we enter the third quarter with a strong system pipeline. We are optimistic about the early successes of our OEM agreement with HP and about the potential expansion of this relationship in 2011. In addition, incremental growth opportunities continue to develop within our Fortus line of 3D production systems. We believe our future remains bright,” Crump concluded. The company plans to hold a conference call to discuss its second quarter financial results on Wednesday, July 28, 2010 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: http://phx.corporate-ir.net/playerlink.zhtml?c=61402&s=wm&e=3223468. To participate by telephone, the domestic dial-in number is 800-299-7089 and the international dial-in is 617-801-9714. The access code is 75582905. 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 Web site or at the provided web address. (Financial tables follow)Stratasys, Inc., Minneapolis, manufactures additive manufacturing machines for prototyping and manufacturing plastic parts. The company also operates a service for part prototyping and production. According to Wohlers Report 2010, Stratasys supplied more additive fabrication systems than any other competitor in 2009, making it the unit market leader for the eighth consecutive year. Stratasys patented and owns the process known as FDM.® The process creates functional prototypes and end-use parts directly from any 3D CAD program, using high-performance industrial thermoplastics. The company holds more than 285 granted or pending additive fabrication patents globally. Stratasys products are used in the aerospace, defense, automotive, medical, business and industrial equipment, education, architecture, and consumer-product industries. Online at: www.Stratasys.com. Forward Looking StatementsAll statements herein that are not historical facts or that include such words as “expects,” “anticipates,” “projects,” “estimates,” “vision,” “could,” “potential,” “planning” or “believes” or similar words constitute forward-looking statements covered by the safe harbor protection of the Private Securities Litigation Reform Act of 1995.Except for the historical information herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties.These include statements regarding projected revenue and income in future quarters; the size of the 3D printing market; our objectives for the marketing and sale of our Dimension® and uPrint 3D Printers; our WaveWash support removal system; and our FortusTM 3D Production Systems, particularly for use in direct digital manufacturing (DDM); the demand for our proprietary consumables; the expansion of our paid parts service; and our beliefs with respect to the growth in the demand for our products.Other risks and uncertainties that may affect our business include our ability to penetrate the 3D printing market; the success of our distribution agreement with HP; our ability to achieve the growth rates experienced in preceding quarters; our ability to introduce, produce and market new materials, such as ABSplus and ABS-M30, and the market acceptance of these and other materials; the impact of competitive products and pricing; our timely development of new products and materials and market acceptance of those products and materials; the success of our recent R&D initiative to expand the DDM capabilities of our core FDM technology; and the success of our RedEyeOnDemandTMand other paid parts services.Actual results may differ from those expressed or implied in our forward-looking statements. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements, but we expressly disclaim any obligation to do so, even if our beliefs and expectations change. In addition to the statements described above, such forward-looking statements are subject to the risks and uncertainties described more fully in our reports filed or to be filed with the Securities and Exchange Commission, including our annual reports on Form 10-K and quarterly reports on Form 10-Q.Financial Tables & Non-GAAP DiscussionThe information discussed within this release includes financial results that are in accordance with accounting principles generally accepted in the United States (GAAP).In addition, certain non-GAAP financial measures have been provided that exclude certain charges and expenses.The non-GAAP measures should be read in conjunction with the corresponding GAAP measures and should be considered in addition to, and not as an alternative or substitute for, the measures prepared in accordance with GAAP.The non-GAAP financial measures are provided in an effort to provide information that investors may deem relevant to evaluate results from the company's core business operations and to compare the company's performance with prior periods.The non-GAAP financial measures primarily identify and exclude certain discrete items, such as the warrant charge, restructuring expenses, and expenses associated with stock-based compensation required under ASC 718.The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods.This release is also available on the Stratasys Web site at www.Stratasys.com. STRATASYS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 30,Six Months Ended June 30,2010200920102009 (unaudited) (unaudited)(unaudited) (unaudited) Net sales Product $ 23,797,952 $ 18,200,029 $ 45,559,570 $ 35,151,531 Services 6,261,544 6,448,248 12,494,051 12,641,547 Fair value of warrant related to OEM agreement - - (4,987,806 ) - 30,059,496 24,648,277 53,065,815 47,793,078 Cost of sales Product 12,432,146 10,278,739 23,110,163 20,964,894 Services 2,865,346 2,796,317 5,773,572 5,682,610 15,297,492 13,075,056 28,883,735 26,647,504 Gross profit 14,762,004 11,573,221 24,182,080 21,145,574 Operating expenses Research and development 2,550,833 1,655,206 4,949,331 3,526,965 Selling, general and administrative 8,198,063 8,467,618 15,981,782 17,775,827 10,748,896 10,122,824 20,931,113 21,302,792 Operating income (loss) 4,013,108 1,450,397 3,250,967 (157,218 ) Other income (expense) Interest income, net 163,690 237,913 378,890 524,266 Foreign currency transaction losses, net (438,551 ) (399,819 ) (797,806 ) (163,218 ) Other (24,225 ) 12,078 (5,985 ) 25,803 (299,086 ) (149,828 ) (424,901 ) 386,851 Income before income taxes 3,714,022 1,300,569 2,826,066 229,633 Income taxes 1,381,867 450,998 937,010 83,990 Net income $ 2,332,155 $ 849,571 $ 1,889,056 $ 145,643 Earnings per common share Basic $ 0.11 $ 0.04 $ 0.09 $ 0.01 Diluted $ 0.11 $ 0.04 $ 0.09 $ 0.01 Weighted average number of common shares outstanding Basic 20,527,571 20,223,139 20,485,059 20,221,995 Diluted 21,070,029 20,242,197 21,047,241 20,236,245 STRATASYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30,December 31,20102009 (unaudited) ASSETS Current assets Cash and cash equivalents $ 12,244,607 $ 48,315,926 Short-term investments - held to maturity 19,705,233 16,073,718 Accounts receivable, less allowance for returns and doubtful accounts of $1,409,750 at June 30, 2010 and $903,101 at December 31, 2009 21,740,568 19,249,813 Inventories 17,333,073 14,608,014 Net investment in sales-type leases, less allowance for doubtful accounts of $126,393 at June 30, 2010 and $222,011 at December 31, 2009 3,745,024 3,618,876 Prepaid expenses and other current assets 2,338,178 2,247,612 Deferred income taxes 2,277,000 2,277,000 Total current assets 79,383,683 106,390,959 Property and equipment, net 26,013,647 26,326,012 Other assets Intangible assets, net 7,124,474 7,653,269 Net investment in sales-type leases 3,055,752 3,477,039 Deferred income taxes 688,000 688,000 Long-term investments - available for sale 1,030,750 1,055,750 Long-term investments - held to maturity 38,858,034 5,467,318 Other non-current assets 1,869,406 2,078,165 Total other assets 52,626,416 20,419,541 Total assets $ 158,023,746 $ 153,136,512 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and other current liabilities $ 9,561,210 $ 12,874,798 Unearned revenues 10,725,560 10,678,427 Total current liabilities 20,286,770 23,553,225 Commitments and contingencies Stockholders' equity Common stock, $.01 par value, authorized 30,000,000 shares; 26,245,318 and 26,053,318 issued as of 2010 and 2009, respectively 262,453 260,533 Capital in excess of par value 100,889,495 94,329,398 Retained earnings 75,904,995 74,015,940 Accumulated other comprehensive loss (315,542 ) (18,159 ) Less cost of treasury stock, 5,687,631 shares in 2010 and 2009 (39,004,425 ) (39,004,425 ) Total stockholders' equity 137,736,976 129,583,287 Total liabilities and stockholders' equity $ 158,023,746 $ 153,136,512 STRATASYS, INC. RECONCILIATION OF NON-GAAP TO GAAP RESULTS OF OPERATIONS Non-GAAP Adjustments for the Three Months Ended June 30, 2010Non-GAAP Adjustments for the Three Months Ended June 30, 2009ConsolidatedConsolidatedConsolidatedConsolidated(unaudited)Stock-Based(unaudited)(unaudited)Stock-Based(unaudited) As ReportedCompensation (1)Non-GAAPAs ReportedCompensation (1)Non-GAAP Selling, general and administrative expenses $ 8,198,063 $ (310,544 ) $ 7,887,519 $ 8,467,618 $ (182,374 ) $ 8,285,244 Total operating expenses 10,748,896 (310,544 ) 10,438,352 10,122,824 (182,374 ) 9,940,450 Operating income 4,013,108 310,544 4,323,652 1,450,397 182,374 1,632,771 Income before income taxes 3,714,022 310,544 4,024,566 1,300,569 182,374 1,482,943 Income taxes 1,381,867 48,712 1,430,579 450,998 20,000 470,998 Net income $ 2,332,155 $ 261,832 $ 2,593,987 $ 849,571 $ 162,374 $ 1,011,945 Earnings per common share Basic $ 0.11 $ 0.01 $ 0.13 $ 0.04 $ 0.01 $ 0.05 Diluted $ 0.11 $ 0.01 $ 0.12 $ 0.04 $ 0.01 $ 0.05 Weighted average number of common shares outstanding Basic 20,527,571 20,527,571 20,223,139 20,223,139 Diluted 21,070,029 21,070,029 20,242,197 20,242,197 Non-GAAP Adjustments for the Six Months Ended June 30, 2010Non-GAAP Adjustments for the Six Months Ended June 30, 2009ConsolidatedConsolidatedConsolidatedConsolidated(unaudited)Stock-BasedFair Value(unaudited)(unaudited)Stock-Based(unaudited) As ReportedCompensation (2)of Warrant (3) Non-GAAPAs ReportedCompensation (1)Restructuring (4)Non-GAAP Net sales $ 53,065,815 $ - $ 4,987,806 $ 58,053,621 $ 47,793,078 $ - $ - $ 47,793,078 Gross profit 24,182,080 - 4,987,806 29,169,886 21,145,574 - - 21,145,574 Selling, general and administrative expenses 15,981,782 (621,088 ) - 15,360,694 17,775,827 (432,927 ) (778,840 ) 16,564,060 Total operating expenses 20,931,113 (621,088 ) - 20,310,025 21,302,792 (432,927 ) (778,840 ) 20,091,025 Operating income (loss) 3,250,967 621,088 4,987,806 8,859,861 (157,218 ) 432,927 778,840 1,054,549 Income before income taxes 2,826,066 621,088 4,987,806 8,434,960 229,633 432,927 778,840 1,441,400 Income taxes 937,010 209,120 1,796,510 2,942,640 83,990 74,000 266,907 424,897 Net income $ 1,889,056 $ 411,968 $ 3,191,296 $ 5,492,320 $ 145,643 $ 358,927 $ 511,933 $ 1,016,503 Earnings per common share Basic $ 0.09 $ 0.02 $ 0.16 $ 0.27 $ 0.01 $ 0.02 $ 0.03 $ 0.05 Diluted $ 0.09 $ 0.02 $ 0.15 $ 0.26 $ 0.01 $ 0.02 $ 0.03 $ 0.05 Weighted average number of common shares outstanding Basic 20,485,059 20,485,059 20,221,995 20,221,995 Diluted 21,047,241 21,047,241 20,236,245 20,236,245 These adjustments reconcile the Company's GAAP results of operations to its non-GAAP results of operations. The Company believes that presentation of results adjusted for the non-GAAP items described below provides meaningful supplemental information to both management and investors. (1) - Represents non-cash stock-based compensation expense. (2) - Represents non-cash stock-based compensation expense and an additional tax benefit realized from disqualifying dispositions of stock options. (3) - Represents the fair value of a warrant issued during the first quarter of 2010 in connection with the Hewlett-Packard Company OEM agreement. (4) - Represents severance and other related costs associated with the Company's restructuring in the first quarter of 2009. 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.