Stratasys Releases Fourth Quarter and Full Year 2016 Financial Results

Company reports $175.3 million in revenue for Q4 with an increase in recurring revenues

GAAP net loss of $14.8 million, or ($0.30) per diluted share, and non-GAAP net income of $7.8 million, or $0.15 per diluted share, in Q4

Generated $26 million of cash from operations during the fourth quarter

Company provides financial guidance for full year 2017

MINNEAPOLIS & REHOVOT, Israel--()--Stratasys Ltd. (Nasdaq:SSYS), the 3D printing and additive manufacturing solutions company, announced financial results for the fourth quarter and full year of 2016.

“We are pleased with our fourth quarter results, and the progress we are making to improve and deepen customer engagement. Our increased revenue, combined with the ongoing activities to better align our cost structure, contributed to a significant improvement in operating profit and cash generation during the quarter”

Q4-2016 Financial Results Summary:

Revenue for the fourth quarter of 2016 was $175.3 million, compared to $173.4 million for the same period last year with consumable revenue increasing by 11% for the same period.

  • GAAP gross margin was 47.3% for the fourth quarter, compared to a GAAP gross margin of 30.6% for the same period last year.
  • Non-GAAP gross margin was 53.6% for the fourth quarter, compared to 48.1% for the same period last year.
  • GAAP operating loss for the fourth quarter was $29.2 million, compared to a loss of $187.8 million for the same period last year.
  • Non-GAAP operating income for the fourth quarter was $11.6 million, compared to non-GAAP operating loss of $8.9 million for the same period last year.
  • GAAP net loss for the fourth quarter was $14.8 million, or ($0.30) per diluted share, compared to a loss of $232.3 million, or ($4.46) per diluted share, for the same period last year.
  • Non-GAAP net income for the fourth quarter was $7.8 million, or $0.15 per diluted share, compared to Non-GAAP net loss of $0.7 million, or ($0.01) per diluted share, reported for the same period last year.
  • The Company generated $26.0 million in cash from operations during the fourth quarter and ended the period with $280.3 million in cash and cash equivalents.
  • Net R&D expenses for the fourth quarter amounted to $24.3 million, representing 13.9% of net sales.

Fiscal 2016 Financial Results Summary:

  • Revenue for fiscal 2016 was $672.5 million compared to $696.0 million for fiscal 2015.
  • GAAP net loss for fiscal 2016 was $77.2 million, or ($1.48) per diluted share, compared to $1.4 billion, or ($26.64) per diluted share, for fiscal 2015.
  • Non-GAAP net income for fiscal 2016 was $14.8 million, or $0.28 per diluted share, compared to non-GAAP net income of $10.0 million, or $0.19 per diluted share, reported for fiscal 2015.
  • The Company generated $62.0 million in cash from operations in fiscal 2016.

“We are pleased with our fourth quarter results, and the progress we are making to improve and deepen customer engagement. Our increased revenue, combined with the ongoing activities to better align our cost structure, contributed to a significant improvement in operating profit and cash generation during the quarter,” said Ilan Levin, Chief Executive Officer of Stratasys. “Additionally, we are encouraged by the growth in our recurring revenue during the period, demonstrating strong utilization of our installed base of systems.”

Recent Business Highlights:

  • Maintaining leadership in the professional rapid prototype market, the company launched the new Stratasys F123, which combines optimized workflow capability and increased speed, with engineering grade performance, offering, for the first time in a professional grade rapid prototyping system, the ability to also print with low-cost PLA for concept modeling.
  • Announced innovative new materials:
    • Nylon 12CF is a new carbon-fiber-filled thermoplastic for FDM strong enough to replace metal in a range of applications, and meeting the functional performance testing demands in the automotive, aerospace, recreational goods, and industrial manufacturing sectors.
    • Agilus30 is a new line of high-durability flexible materials for PolyJet that can endure repeated flexing, providing designers and engineers with greater freedom to handle and test flexible parts and prototypes, delivering superior accuracy, fine details and enhanced product realism.
  • Strengthened leadership in product and ecosystem development through collaborations with key industry leaders:
    • Announced agreement with Siemens to develop a cohesive, best-of-breed manufacturing capability through the integration of Siemens’ Digital Factory with Stratasys additive manufacturing solutions.
    • Announced collaboration with Dassault Systèmes' SIMULIA to enable final part designs that are optimized for weight and strength significantly reducing fuel consumption within the aerospace and automotive industries;
    • Released a GrabCAD Print Add-In for Dassault Systèmes' SOLIDWORKS that allows users to estimate and print parts directly from the SOLIDWORKS environment.
  • Recognized leadership position in key target markets:
    • Announced Airbus has standardized Stratasys’ FDM based additive manufacturing ULTEM™ 9085 3D printing solutions for the production of flight parts on its A350 XWB aircraft.
    • Named as the Official Supplier of 3D Printing Solutions to the McLaren-Honda Formula 1 team for prototyping, tooling, and customized production parts.
    • Entered into technical relationship with Team Penske to provide 3D printing solutions for NASCAR and IndyCar engineering and manufacturing applications.

“We made significant progress in 2016 as we leverage our extensive technology and application knowledge, together with our large customer base, into value-added solutions within key target markets,” continued Levin. “Our focus is on developing enhanced products and a more robust ecosystem, supported by collaborations with industry leaders, including Siemens, Boeing, Airbus, Ford, McLaren Racing, and Team Penske. We are proud of these achievements and see them as validation of our leadership position.”

Financial Guidance:
Stratasys today provided the following information regarding the company’s guidance for projected revenue and net income for the fiscal year ending December 31, 2017:

  • Revenue guidance of $645 to $680 million.
  • Non-GAAP net income of $10 to $20 million, or $0.19 to $0.37 per diluted share.
  • GAAP net loss of $53 to $39 million, or a ($1.00) to ($0.73) per diluted share.

Stratasys provided the following additional guidelines regarding the company’s projected performance and strategic plans for 2017:

  • Non-GAAP operating margins of 3% to 5%.
  • Capital expenditures are projected at $40 to $50 million.

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

Non-GAAP earnings guidance excludes $34 million of projected amortization of intangible assets; $18 to $20 million of share-based compensation expense; $2 to $3 million in merger and acquisition related expense; and $8 to $10 million in reorganization and other related costs; and includes $3 to $4 million in tax expenses related to non-GAAP adjustments.

“As we move into 2017, we continue to invest in achieving our long-term goals. As we extend our reach into use-case centric applications, we intend to continue to shift resources to build out our capabilities around high-value added applications. We believe our combined efforts can lead to improved quality of revenue, and enable long-term, strong and sustainable growth. We are excited about the potential market opportunity that lies ahead,” Levin concluded.

Stratasys Ltd. Q4 2016 Conference Call Details

The Company plans to hold the conference call to discuss its fourth quarter and full year 2016 financial results on Thursday, March 9, 2017 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://edge.media-server.com/m/p/9kxkoga5/.

To participate by telephone, the domestic dial-in number is (855) 319-2216 and the international dial-in is (503) 343-6033. The access code is 73596435.

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 by accessing the provided web address.

For more than 25 years, Stratasys Ltd. (NASDAQ:SSYS) has been a defining force and dominant player in 3D printing and additive manufacturing – shaping the way things are made. Headquartered in Minneapolis, Minnesota and Rehovot, Israel, the company empowers customers across a broad range of vertical markets by enabling new paradigms for design and manufacturing. The company’s solutions provide customers with unmatched design freedom and manufacturing flexibility – reducing time-to-market and lowering development costs, while improving designs and communications. Stratasys subsidiaries include MakerBot and Solidscape, and the Stratasys ecosystem includes 3D printers for prototyping and production; a wide range of 3D printing materials; parts on-demand via Stratasys Direct Manufacturing; strategic consulting and professional services; and the Thingiverse and GrabCAD communities with over 2 million 3D printable files for free designs. With more than 2,500 employees and 1,200 granted or pending additive manufacturing patents, Stratasys has received more than 30 technology and leadership awards. Visit us online at: www.stratasys.com or http://blog.stratasys.com/, and follow us on LinkedIn.

Stratasys is a registered trademark of Stratasys Ltd. and/or its subsidiaries or affiliates.

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 2017, 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: any failure to efficiently and successfully integrate the operations of Stratasys, Inc. and various entities that it has acquired, including MakerBot, Solid Concepts, Harvest and GrabCAD, or to successfully establish and execute effective post-acquisition integration plans; changes in the overall global economic environment; the impact of competition and new technologies; changes in the general market, political and economic conditions in the countries in which we operate; any underestimates in projected capital expenditures and liquidity; changes in our strategy; changes in applicable government regulations and approvals; changes in customers’ budgeting priorities; lower than expected demand for our products and services; reduction in our profitability due to shifting in our product mix into lower margin products or our shifting in our revenues mix significantly towards our AM services business; costs and potential liability relating to litigation and regulatory proceedings; and those factors referred to in Item 3.D “Key Information - Risk Factors”, Item 4, “Information on the Company”, and Item 5, “Operating and Financial Review and Prospects” in our 2015 Annual Report, together with the 2016 Annual Report that we will file soon, as well as in the 2016 Annual Report generally. Readers are urged to carefully review and consider the various disclosures made throughout the Form 20-Fand in Stratasys’ 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, on this call 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 merger and acquisition related expense and reorganization-related charges, and (y) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, impairment of goodwill and other long-lived assets, changes in fair value of obligations in connection with acquisitions and the corresponding tax effect of those items. We also exclude non-recurring changes of non-cash valuation allowance on deferred tax assets, as well as, non-recurring significant tax charges or benefits that relate to prior periods which we do not believe are reflective of ongoing business and operating results. 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 Statements of Operations
 
(in thousands, except per share data)                        
 
Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016 2015
(unaudited)     (unaudited)        
Net sales
Products $ 126,556 $ 124,316 $ 479,031 $ 503,946
Services   48,747     49,046     193,427     192,049  
175,303 173,362 672,458 695,995
 
Cost of sales
Products 61,970 86,753 234,653 466,221
Services   30,409     33,537     120,499     127,602  
92,379 120,290 355,152 593,823
       
Gross profit 82,924 53,072 317,306 102,172
 
Operating expenses
Research and development, net 24,304 31,918 97,778 122,360
Selling, general and administrative 88,773 113,126 307,114 434,619
Goodwill impairment - 96,550 - 942,408
Change in the fair value of obligations in connection with acquisitions   (988 )   (713 )   (873 )   (23,671 )
112,089 240,881 404,019 1,475,716
       
Operating loss (29,165 ) (187,809 ) (86,713 ) (1,373,544 )
 
Financial income (expenses), net (862 ) (947 ) 354 (10,287 )
       
Loss before income taxes (30,027 ) (188,756 ) (86,359 ) (1,383,831 )
 

Income tax expenses (benefit)

(15,729 ) 43,770 (9,446 ) (10,320 )
 
Share in losses of associated company   (526 )   -     (708 )   -  
 
Net loss (14,824 ) (232,526 ) (77,621 ) (1,373,511 )
 
Net loss attributable to non-controlling interest (63 ) (183 ) (402 ) (676 )
 
Net loss attributable to Stratasys Ltd. $ (14,761 ) $ (232,343 ) $ (77,219 ) $ (1,372,835 )
 
Net loss per ordinary share attributable to Stratasys Ltd.
Basic $ (0.28 ) $ (4.46 ) $ (1.48 ) $ (26.64 )
Diluted (0.30 ) (4.46 ) (1.48 ) (26.64 )
 
Weighted average ordinary shares outstanding
Basic 52,620 52,046 52,330 51,592
Diluted 52,784 52,046 52,582 51,592
 
                       
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
     
Three Months Ended December 31,
2016 Non-GAAP 2016 2015 Non-GAAP 2015
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
U.S. dollars and shares in thousands (except per share amounts)
 
Gross profit (1) $ 82,924 $ 11,093 $ 94,017 $ 53,072 $ 30,309 $ 83,381
Operating income (loss) (1,2) (29,165 ) 40,733 11,568 (187,809 ) 178,927 (8,882 )

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

(14,761 ) 22,588 7,827 (232,343 ) 231,647 (696 )

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

$ (0.30 ) $ 0.45 $ 0.15 $ (4.46 ) $ 4.45 $ (0.01 )
 
 
(1) Acquired intangible assets amortization expense 10,394 10,830
Impairment charges of other intangible assets - 10,779
Non-cash stock-based compensation expense 648 1,012
Reorganization and other related costs 276 7,523
Merger and acquisition and other expense   (225 )   165  
11,093 30,309
 
(2) Acquired intangible assets amortization expense 3,822 4,464
Goodwill impairment - 96,550
Non-cash stock-based compensation expense 4,238 4,838
Impairment charges of intangible assets and other long lived assets 21,774 31,299
Change in fair value of obligations in connection with acquisitions (988 ) (713 )
Reorganization and other related costs 251 9,365
Merger and acquisition and other expense   543     2,815  
  29,640     148,618  
  40,733     178,927  
 

(3)

Corresponding tax effect and other tax adjustments (18,355 ) 52,720

Intangible assets amortization expense of associated company

  210     -  
$ 22,588   $ 231,647  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

52,784 53,255 52,046 52,046
 
                         
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Results of Operations
 
     
Twelve Months Ended December 31,
2016 Non-GAAP 2016 2015 Non-GAAP 2015
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
U.S. dollars and shares in thousands (except per share amounts)
 
Gross profit (1) $ 317,306 $ 50,334 $ 367,640 $ 102,172 $ 259,545 $ 361,717
Operating income (loss) (1,2) (86,713 ) 115,729 29,016 (1,373,544 ) 1,357,577 (15,967 )

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

(77,219 ) 91,989 14,770 (1,372,835 ) 1,382,789 9,954

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

$ (1.48 ) $ 1.76 $ 0.28 $ (26.64 ) $ 26.83 $ 0.19
 
 
(1) Acquired intangible assets amortization expense 41,712 50,353
Impairment charges of other intangible assets 1,779 191,534
Non-cash stock-based compensation expense 2,780 5,381
Reorganization and other related costs 3,846 10,949
Merger and acquisition related expense   217     1,328  
50,334 259,545
 
(2) Acquired intangible assets amortization expense 14,901 22,436
Goodwill impairment - 942,408
Non-cash stock-based compensation expense 17,993 24,629
Impairment charges of intangible assets and other long-lived assets 21,774 86,937
Change in fair value of obligations in connection with acquisitions (872 ) (23,671 )
Reorganization and other related costs 3,671 16,955
Merger and acquisition related expense   7,928     28,338  
  65,395     1,098,032  
  115,729     1,357,577  
 
(3) Credit facility termination related costs - 2,705
Corresponding tax effect and other tax adjustments (24,233 ) 22,507

Intangible assets amortization expense of associated company

  493     -  
$ 91,989   $ 1,382,789  
 
(4)

Weighted average number of ordinary shares outstanding- Diluted

52,582 53,201 51,592 52,824
 
   
Stratasys Ltd.
 
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
 
Fiscal Year 2017
 
(in millions, except per share data)      
 
 
GAAP net loss ($53) to ($39)
 

Adjustments

Stock-based compensation expense $18 to $20
Intangible assets amortization expense $34
Merger and acquisition related expense $2 to $3
Reorganization and other related costs $8-$10
Tax expense related to Non-GAAP adjustments ($3) to ($4)
 
Non-GAAP net income $10 to $20
 
GAAP loss per share ($1.00) to ($0.73)
 
Non-GAAP diluted earnings per share $0.19 to $0.37
 
 
Stratasys Ltd.
       
Consolidated Balance Sheets
 
(in thousands, except share data)            
December 31, December 31,
2016 2015
       
 
ASSETS
 
Current assets
Cash and cash equivalents $ 280,328 $ 257,592
Accounts receivable, net 120,411 123,215
Inventories 117,521 123,658
Net investment in sales-type leases 11,717 11,704
Prepaid expenses 7,571 8,469
Other current assets   15,491     22,435  
 
Total current assets   553,039     547,073  
 
Non-current assets
Goodwill 385,629 383,853
Other intangible assets, net 177,458 252,468
Property, plant and equipment, net 208,415 201,934
Net investment in sales-type leases - long term 12,126 17,785
Other non-current assets   29,382     11,243  
 
Total non-current assets   813,010     867,283  
 
Total assets $ 1,366,049   $ 1,414,356  
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 40,933 $ 39,021
Current portion of long term-debt 3,714 -
Accrued expenses and other current liabilities 28,282 31,314
Accrued compensation and related benefits 34,186 34,052
Income taxes payable 3,925 11,395
Obligations in connection with acquisitions 3,619 4,636
Deferred revenues   49,952     52,309  
 
Total current liabilities   164,611     172,727  
 
Non-current liabilities
Obligations in connection with acquisitions - long term - 4,354
Deferred tax liabilities 5,952 16,040
Deferred revenues - long-term 12,922 7,627
Long-term debt 22,286 -
Other non-current liabilities   22,251     22,428  
 
Total non-current liabilities   63,411     50,449  
 
Total liabilities   228,022     223,176  
 
Redeemable non-controlling interests 2,029 2,379
 
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 52,639 thousands shares and 52,082 thousands shares issued and outstanding at December 31, 2016 and 2015, respectively

142 141
Additional paid-in capital 2,633,129 2,605,957
Accumulated deficit (1,483,925 ) (1,406,706 )
Accumulated other comprehensive loss   (13,479 )   (10,774 )
Equity attributable to Stratasys Ltd. 1,135,867 1,188,618
Non-controlling interest 131 183
 
Total equity   1,135,998     1,188,801  
 
Total liabilities and equity $ 1,366,049   $ 1,414,356  
 

Contacts

Stratasys Investor Relations
Shane Glenn, 952-294-3416
Vice President - Investor Relations
shane.glenn@stratasys.com

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Release Summary

STRATASYS RELEASES FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS

Stratasys Ltd.