AMS Below article leader board Dec 14

stratasys_logo_transparentAmidst all the euphoria and almost magical energy surrounding 3D printing recently, there was bound to be a fall somewhere; and while indeed there has been in terms of financial reports being issued by 3D printing industry titans over at least the past year, this is confusing to many. As one innovation after another is churned out, and revolutions are proclaimed to be happening in nearly every sector from medical to automotive to fashion—and far beyond—why do the biggest companies seem to be faltering while so many other smaller, often international ones, are dancing with delight over financials?

We must continue to ask that question even as we do see some light ahead in viewing first quarter 2016 financial results for the mega-manufacturer of 3D printing solutions, Stratasys, headquartered in Minneapolis, Minnesota and Rehovot, Israel. While Non-GAAP net income for the first quarter was $0.6 million, or $0.01 per diluted share, compared to non-GAAP net income of $2.0 million, or $0.04 per diluted share, reported for the same period last year, the powers that be at Stratasys recommend viewing their progress in terms of operating profit growth, as that is what they project as offering the best performance measurement for this year.

Q1-2016 Financial Results Summary:

  • Revenue for the first quarter of 2016 was $167.9 million.
  • GAAP operating loss for the first quarter was $21.1 million, compared to a loss of $220.9 million for the same period last year.
  • Non-GAAP operating income was $4.0 million, compared to a loss of $0.8 million for the same period last year.
  • GAAP net loss for the first quarter was $23.1 million, or ($0.44) per diluted share, compared to a loss of $216.3 million, or ($4.24) per diluted share, for the same period last year.
  • Non-GAAP net income for the first quarter was $0.6 million, or $0.01 per diluted share, compared to non-GAAP net income of $2.0 million, or $0.04 per diluted share, reported for the same period last year.
  • The Company generated $31.6 million in cash from operations during the first quarter, and currently holds approximately $280.2 million in cash and cash equivalents and short-term bank deposits.
  • The Company invested a net amount of $22.8 million in R&D projects (non-GAAP basis) during the first quarter, representing 13.6% of net sales.
  • Non-GAAP EBITDA for the first quarter amounted to $12.6 million.
  • The Company sold 5,125 3D printing and additive manufacturing systems during the quarter, and on a pro-forma combined basis, has sold a total of 151,149 systems worldwide as of March 31, 2016.

“Although the overall market environment remains challenging, we made significant progress in improving our operating efficiency during the first quarter, which is demonstrated by the favorable trends we observed in operating expenses and cash generation during the period,” said David Reis, chief executive officer of Stratasys. “We believe the recent refinements to our operating structure will make us more productive and better position us for future growth.”

The new Stratasys J750 3D printer allows for more than 360,000 color combinations.

The new Stratasys J750 3D printer allows for more than 360,000 color combinations.

There has been great positive excitement around the release of the Stratasys J750 3D printer, for which 3DPrint.com was in attendance at the OtterBox headquarters in Fort Collins, Colorado. This should continue to be a major boon for business as it allows users so many more options with full-color and multi-material capabilities. Seeing this as another reinvention for 3D printing, the J750 3D printer is the one that’s really meant to do it all for streamlining workflow, offering much better speed and turnaround, and doubling capabilities while offering a color palette of over 360,000 colors.

Continued operational improvement initiatives have been underway, and as we reported recently, this includes outsourcing of MakerBot desktop 3D printer production to Jabil.

We’ve also been following the new Thingiverse Developer Program, which has just recently been launched, expanding the platform’s functionality by allowing developers to create apps in three different categories: print services, model customization and tools and utilities. It also includes includes documentation, resources, and enrollment for developers and gives instruction for developers regarding creating Thingiverse apps, submitting apps to MakerBot, as well as testing and managing apps and analytics.

Also making headlines was the announced agreement between Stratasys Direct Manufacturing (SDM) and Somos, a leading stereolithography materials provider, through which both parties will seek to accelerate materials development and provide SDM customers with a wider range of advanced material options. And in another development which we are following closely, Stratasys too announced the impending creation of a Center of Excellence in collaboration with the Jacobs Institute. Both companies will bring their considerable years of expertise together, along with 3D printing, to develop and test prototypes and models for the 3D printed medical devices of the future.

“As we transform our business, we are focused on investing for the future, which includes developing new technologies and innovative new products. The recent launch of the Stratasys J750, which offers unmatched color and multi-material printing capabilities, is a great example of that commitment,” continued Reis. “We are also excited about additional products we plan to launch in 2016. These products will support our long-term strategy to develop a comprehensive solutions-based business that targets new applications across key vertical markets. While our near-term visibility remains low, we believe our strategy and improved operating structure will position us for future success in our dynamic industry.”

J750-3D-Printer-1024x941

Stratasys J750 3D Printer

Stratasys provided the following information regarding the company’s projected revenue and net income for the fiscal year ending December 31, 2016:

  • Revenue guidance of $700 to $730 million
  • Non-GAAP net income of $9 to $23 million, or $0.17 to $0.43 per diluted share
  • GAAP net loss of $84.0 to $67.0 million, or ($1.60) to ($1.28) per diluted share

Stratasys provided the following additional information regarding the company’s potential performance and strategic plans for 2016:

  • Gross margins to improve modestly to a range of 54% to 55%
  • Operating margins of 3% to 5%
  • Tax expense of $10 to $11 million, which includes the negative impact of the planned accounting treatment for tax valuation allowance
  • Capital expenditures are projected at $60 to $70 million, with approximately $45 million designated for completing the company’s new facility in Israel

Stratasys foresees an improvement in 2016 regarding their operating structure which will result in better operating profits this year. They recommend looking at those numbers, considering the ‘expected ongoing negative impact on net income of the planned accounting treatment for valuation of deferred tax assets.’ Also according to Stratasys, Non-GAAP earnings guidance excludes $59.0 million of projected amortization of intangible assets; $25.0 to $27.0 million of share-based compensation expense; $7.0 million in merger and acquisition related expense; $4.0 to $5.0 million in reorganization and other related costs; and includes $5.0 million in tax expenses related to non-GAAP adjustments.

See the table below for an itemized detail of the non-GAAP financial measures.

The company held a conference call and live webcast in regards to these financial results earlier today, May 9th, and the webcast will be available at Stratasys for 90 days. To gain access, click here. Discuss in the Stratasys First Quarter Report forum over at 3DPB.com.

Consolidated Balance Sheets
(in thousands, except share data)
March 31,December 31,
20162015
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$213,176$257,592
Short-term bank deposits67,000571
Accounts receivable, net109,132123,215
Inventories124,479123,658
Net investment in sales-type leases12,83311,704
Prepaid expenses7,3628,469
Other current assets20,24321,864
Total current assets554,225547,073
Non-current assets
Goodwill386,559383,853
Other intangible assets, net238,431252,468
Property, plant and equipment, net200,704201,934
Net investment in sales-type leases – long term18,56917,785
Deferred income taxes and other non-current assets14,31311,243
Total non-current assets858,576867,283
Total assets$1,412,801$1,414,356
LIABILITIES AND EQUITY
Current liabilities
Accounts payable$37,549$39,021
Accrued expenses and other current liabilities34,51031,314
Accrued compensation and related benefits41,38034,052
Income taxes payable11,95111,395
Obligations in connection with acquisitions5,0584,636
Deferred revenues52,03152,309
Total current liabilities182,479172,727
Non-current liabilities
Obligations in connection with acquisitions – long term4,6584,354
Deferred tax liabilities14,69416,040
Deferred revenues – long-term8,4637,627
Other non-current liabilities24,57122,428
Total non-current liabilities52,38650,449
Total liabilities234,865223,176
Redeemable non-controlling interests2,2812,379
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 52,107 thousands shares and 52,082 thousands shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively

141141
Additional paid-in capital2,611,6122,605,957
Accumulated deficit(1,429,847)(1,406,706)
Accumulated other comprehensive loss(6,502)(10,774)
Equity attributable to Stratasys Ltd.1,175,4041,188,618
Non-controlling interest251183
Total equity1,175,6551,188,801
Total liabilities and equity$1,412,801$1,414,356
Stratasys Ltd.
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended March 31,
20162015
(unaudited)(unaudited)
Net sales
Products$118,634$126,667
Services49,27246,064
167,906172,731
Cost of sales
Products56,93898,371
Services29,79928,272
86,737126,643
Gross profit81,16946,088
Operating expenses
Research and development, net25,11527,238
Selling, general and administrative76,387102,608
Goodwill impairment150,400
Change in the fair value of obligations in connection with acquisitions727(13,256)
102,229266,990
Operating loss(21,060)(220,902)
Financial income (expenses), net180(5,124)
Loss before income taxes(20,880)(226,026)
Income taxes2,291(9,622)
Net loss(23,171)(216,404)
Net loss attributable to non-controlling interest(30)(116)
Net loss attributable to Stratasys Ltd.$(23,141)$(216,288)
Net loss per ordinary share attributable to Stratasys Ltd.
Basic$(0.44)$(4.24)
Diluted(0.44)(4.24)
Weighted average ordinary shares outstanding
Basic52,09850,956
Diluted52,09850,956
Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Results of Operations
(in thousands, except per share data)
Three Months Ended March 31, 2016Three Months Ended March 31, 2015
GAAPNon-GAAPGAAPNon-GAAP
(unaudited)Adjustments*(unaudited)(unaudited)Adjustments*(unaudited)
Net sales
Products$118,634$$118,634$126,667$$126,667
Services49,27249,27246,06446,064
167,906167,906172,731172,731
Cost of sales
Products56,938(10,836)46,10298,371(45,912)52,459
Services29,799(442)29,35728,272(1,409)26,863
86,737(11,278)75,459126,643(47,321)79,322
Gross profit81,16911,27892,44746,08847,32193,409
Operating expenses
Research and development, net25,115(2,270)22,84527,238(2,817)24,421
Selling, general and administrative76,387(10,738)65,649102,608(32,844)69,764
Goodwill impairment150,400(150,400)
Change in the fair value of obligations in connection with acquisitions727(727)(13,256)13,256
102,229(13,735)88,494266,990(172,805)94,185
Operating income (loss)(21,060)25,0133,953(220,902)220,126(776)
Financial income (expenses), net180180(5,124)(5,124)
Income (loss) before income taxes(20,880)25,0134,133(226,026)220,126(5,900)
Income taxes2,2911,2763,567(9,622)1,814(7,808)
Net income (loss)(23,171)23,737566(216,404)218,3121,908
Net loss attributable to non-controlling interest(30)(30)(116)(116)
Net income (loss) attributable to Stratasys Ltd.$(23,141)$23,737$596$(216,288)$218,312$2,024
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic$(0.44)$0.01$(4.24)$0.04
Diluted(0.44)0.01(4.24)0.04
Weighted average ordinary shares outstanding
Basic52,09852,09850,95650,956
Diluted52,09853,14350,95652,341

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,
20162015
Cost of sales, products
Acquired intangible assets amortization$(10,414)$(14,905)
Acquired intangible assets impairment(29,782)
Non-cash stock-based compensation expense(362)(1,225)
Reorganization and other related costs(60)
(10,836)(45,912)
Cost of sales, services
Non-cash stock-based compensation expense(361)(608)
Reorganization and other related costs280
Merger and acquisition related expense(361)(801)
(442)(1,409)
Research and development, net
Non-cash stock-based compensation expense(1,359)(1,868)
Merger and acquisition related expense(911)(949)
(2,270)(2,817)
Selling, general and administrative
Acquired intangible assets amortization(3,760)(6,456)
Non-cash stock-based compensation expense(3,541)(6,059)
Merger and acquisition related expense(2,342)(6,906)
Reorganization and other related costs(1,095)
Acquired intangible assets impairment(13,423)
(10,738)(32,844)
Goodwill impairment(150,400)
Change in the fair value of obligations in connection with acquisitions
Change in the fair value of obligations in connection with acquisitions(727)13,256
Income taxes
Corresponding tax effect and other tax adjustments1,2761,814
Net income$23,737$218,312
Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
Fiscal Year 2016
(in millions, except per share data)
GAAP net loss($84) to ($67)

Adjustments

Stock-based compensation expense$25 to $27
Intangible assets amortization expense$59
Merger and acquisition related expense$7
Reorganization and other related costs$4 to $5
Tax expense related to Non-GAAP adjustments($5)
Non-GAAP net income$9 to $23
GAAP loss per share($1.60) to ($1.28)
Non-GAAP diluted earnings per share$0.17 to $0.43
[Source: Business Wire]
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