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TheStreet Open House

Stratasys Reports Strong Fourth Quarter And Fiscal 2012 Financial Results

Non-GAAP Discussion Disclosure

The information discussed within this release includes financial results and projections 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, expenses and income. 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 transaction-related expenses, amortization expenses and expenses associated with share-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 available on the Stratasys web site at www.stratasys.com

Stratasys Ltd. (Nasdaq: SSYS) is the corporate entity formed in 2012 by the merger of 3D printing companies Stratasys Inc. and Objet Ltd., based in Minneapolis, Minn. and Rehovot, Israel. The Company manufactures 3D printers and materials for prototyping and production. Its patented FDM ® and PolyJet ® processes produce prototypes and manufactured goods directly from 3D CAD files or other 3D content. Systems include affordable desktop 3D printers for idea development, a range of systems for prototyping, and large production systems for direct digital manufacturing. Since June 2012, the Company’s range of over 130 3D printing materials is the widest in the industry and includes in excess of 120 proprietary inkjet-based photopolymer materials and 10 proprietary FDM-based thermoplastic materials. Stratasys also manufactures Solidscape 3D Printers and operates the RedEye On Demand digital-manufacturing service. The Company has more than 1100 employees, holds more than 500 granted or pending additive manufacturing patents globally, and has received more than 20 awards for its technology and leadership. Online at: www.stratasys.com or http://blog.stratasys.com / www.objet.com or http://blog.objet.com.

 
Stratasys Ltd.
       
Consolidated Statements of Operations
 
(in thousands, except per share data)
 
Three Months Ended December 31, Twelve Months Ended December 31, 2011
2012 2011 2012 2011
(unaudited)   (unaudited) (unaudited)    
Net sales
Products $ 59,461 $ 36,203 $ 179,762 $ 127,476
Services   11,690     7,369     35,482   28,418
71,151 43,572 215,244 155,894
 
Cost of sales
Products 32,138 17,792 86,742 61,545
Services   6,175     2,916     18,591   11,945
38,313 20,708 105,333 73,490
       
Gross profit 32,838 22,864 109,911 82,404
 
Operating expenses
Research and development, net 7,083 3,672 19,659 14,360
Selling, general and administrative   30,764     10,300     73,130   39,038
37,847 13,972 92,789 53,398
       
Operating income (loss) (5,009 ) 8,892 17,122 29,006
 
Other income (expense) 871 (187 ) 1,388 2,346
       
Income (loss) before income taxes (4,138 ) 8,705 18,510 31,352
 
Income taxes (benefit)   (239 )   2,919     9,687   10,726
 
Net income (loss) $ (3,899 ) $ 5,786 $ 8,823 $ 20,626
 
Net income attributable to non-controlling interest $ 332   $ -   $ 332 $ -
 
Net income (loss) attributable to Stratasys Ltd. $ (4,231 ) $ 5,786   $ 8,491 $ 20,626
 
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic $ (0.16 ) $ 0.27 $ 0.37 $ 0.98
Diluted (0.16 ) 0.27 0.36 0.95
 
Weighted average ordinary shares outstanding
Basic 27,261 21,207 22,812 21,133
Diluted 27,261 21,588 23,776 21,653
 
Stratasys Ltd.
     
Consolidated Balance Sheets
 
(in thousands)
 
December 31,   2012     2011  
 
ASSETS
 
Current assets
Cash and cash equivalents $ 133,826 $ 20,092
Short-term bank deposits 20,063 -
Restricted deposits 929 -
Short-term investments - 14,602
Accounts receivable:

Trade, less allowance for doubtful accounts of $654 at December 31, 2012 and $1,089 at December 31, 2011

64,678 24,642
Other 22,934 1,589
Inventories 67,995 22,771

Net investment in sales-type leases, less allowance for doubtful accounts of $301 at December 31, 2012 and $230 at December 31, 2011

5,134 3,295
Prepaid expenses 2,751 3,259
Deferred income taxes   4,968     2,973  
 
Total current assets   323,278     93,223  
 
Property, plant and equipment, net   62,070     39,669  
 
Other assets
Goodwill 822,475 25,394
Other intangible assets, net 510,372 25,295
Net investment in sales-type leases 7,872 5,495
Long-term investments 1,634 32,581

Amounts funded in respect of employees rights upon retirement

2,628 -
Other non-current assets   1,184     113  
 
Total other assets   1,346,165     88,878  
 
Total assets $ 1,731,513   $ 221,770  
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 35,235 $ 8,541
Other current liabilities 40,179 10,827
Deferred tax liabilities 945 -
Unearned revenues   18,068     9,769  
 
Total current liabilities   94,427     29,137  
 
Non-current liabilities
Employee rights upon retirement 4,188 -
Deferred tax liabilities 54,693 6,760
Unearned revenues - long-term 3,181 2,562
Other non-current liabilities   2,868     -  
 
Total liabilities   159,357     38,459  
 
Commitments and contingencies
 
Equity

Ordinary shares, NIS 0.01 nominal value, authorized 60,000 shares; 38,372 and 21,246 shares issued and outstanding at December 31, 2012 and 2011, respectively

101 55
Additional paid-in capital 1,459,294 79,343
Retained earnings 112,503 104,012
Accumulated other comprehensive loss   (238 )   (99 )
 
Equity attributable to Stratasys Ltd. 1,571,660 183,311
 
Non-controlling interest   496     -  
 
Total equity   1,572,156     183,311  
 
Total liabilities and equity $ 1,731,513   $ 221,770  
 
Note: Certain reclassifications have been made to prior period balances to conform to current period presentation.
 
Stratasys Ltd.
           
Reconciliation of Pro Forma GAAP to Pro Forma Non-GAAP Results of Operations
 
(in thousands, except per share data)
 
Three Months Ended December 31, 2012 Three Months Ended December 31, 2011
Pro Forma Pro Forma Pro Forma Pro Forma
GAAP Non-GAAP GAAP Non-GAAP
(unaudited)   Adjustments*   (unaudited) (unaudited)   Adjustments*   (unaudited)
Net sales
Products $ 81,651 $ - $ 81,651 $ 66,512 $ - $ 66,512
Services   14,711     -     14,711   11,778     -     11,778  
96,362 - 96,362 78,290 - 78,290
 
Cost of sales
Products 41,641 (10,936 ) 30,705 38,039 (10,519 ) 27,520
Services   10,329     (397 )   9,932   6,656     (438 )   6,218  
51,970 (11,333 ) 40,637 44,695 (10,957 ) 33,738
           
Gross profit 44,392 11,333 55,725 33,595 10,957 44,552
 
Operating expenses
Research and development, net 10,210 (988 ) 9,222 8,241 (879 ) 7,362
Selling, general and administrative   38,200     (10,059 )   28,141   29,166     (7,399 )   21,767  
48,410 (11,047 ) 37,363 37,407 (8,278 ) 29,129
           
Operating income (loss) (4,018 ) 22,380 18,362 (3,812 ) 19,235 15,423
 
Other income (expense) 1,408 - 1,408 (77 ) - (77 )
           
Income (loss) before income taxes (2,610 ) 22,380 19,770 (3,889 ) 19,235 15,346
 
Income taxes   747     2,606     3,353   2,408     1,285     3,693  
 
Net income (loss) $ (3,357 ) $ 19,774 $ 16,417 $ (6,297 ) $ 17,950 $ 11,653
 
Net income attributable to non-controlling interest $ 158   $ -   $ 158 $ -   $ -   $ -  
 
Net income (loss) attributable to Stratasys Ltd. $ (3,515 ) $ 19,774   $ 16,259 $ (6,297 ) $ 17,950   $ 11,653  
 
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic $ (0.09 ) $ 0.43 $ (0.17 ) $ 0.32
Diluted (0.09 ) 0.40 (0.17 ) 0.30
 
Weighted average ordinary shares outstanding
Basic 37,557 37,557 36,652 36,652
Diluted 37,557 40,327 36,652 39,480
 
 
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 Pro Forma GAAP to Pro Forma Non-GAAP Results of Operations
 
(in thousands, except per share data)
 
Twelve Months Ended December 31, 2012 Twelve Months Ended December 31, 2011
Pro Forma Pro Forma
Pro Forma Non-GAAP Pro Forma Non-GAAP
(unaudited)   Adjustments*   (unaudited) (unaudited)   Adjustments*   (unaudited)
Net sales
Products $ 306,043 $ - $ 306,043 $ 233,235 $ - $ 233,235
Services   53,011     -     53,011   43,755     -     43,755  
359,054 - 359,054 276,990 - 276,990
 
Cost of sales
Products 158,828 (42,964 ) 115,864 137,556 (41,826 ) 95,730
Services   36,303     (1,475 )   34,828   26,395     (1,504 )   24,891  
195,131 (44,439 ) 150,692 163,951 (43,330 ) 120,621
           
Gross profit 163,923 44,439 208,362 113,039 43,330 156,369
 
Operating expenses
Research and development, net 36,923 (3,597 ) 33,326 31,934 (3,005 ) 28,929
Selling, general and administrative   141,232     (40,354 )   100,878   104,928     (28,287 )   76,641  
178,155 (43,951 ) 134,204 136,862 (31,292 ) 105,570
           
Operating income (loss) (14,232 ) 88,390 74,158 (23,823 ) 74,622 50,799
 
Other income (expense) 2,124 - 2,124 1,118 (1,831 ) (713 )
           
Income (loss) before income taxes (12,108 ) 88,390 76,282 (22,705 ) 72,791 50,086
 
Income taxes   9,407     7,225     16,632   8,148     4,768     12,916  
 
Net income (loss) $ (21,515 ) $ 81,165 $ 59,650 $ (30,853 ) $ 68,023 $ 37,170
 
Net income attributable to non-controlling interest $ 62   $ -   $ 62 $ -   $ -   $ -  
 
Net income (loss) attributable to Stratasys Ltd. $ (21,577 ) $ 81,165   $ 59,588 $ (30,853 ) $ 68,023   $ 37,170  
 
Net income (loss) per ordinary share attributable to Stratasys Ltd.
Basic $ (0.58 ) $ 1.61 $ (0.84 ) $ 1.02
Diluted (0.58 ) 1.49 (0.84 ) 0.94
 
Weighted average ordinary shares outstanding
Basic 36,987 36,987 36,577 36,577
Diluted 36,987 39,970 36,577 39,656
 
 
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 December 31, Twelve Months Ended December 31,
  2012     2011     2012     2011  
Cost of sales, products
Objet intangible assets amortization expense (9,824 ) (9,824 ) (39,294 ) (39,294 )
Solidscape intangible assets amortization expense (436 ) (436 ) (1,744 ) (1,163 )
Non-cash stock-based compensation expense (361 ) (259 ) (1,190 ) (808 )
Merger related expense (194 ) - (265 ) -

Expense related to the revaluation of Solidscape, Inc. and Fasotech Co., Ltd inventory at acquisition

  (121 )   -     (471 )   (561 )
(10,936 ) (10,519 ) (42,964 ) (41,826 )
 
Cost of sales, services
Non-cash stock-based compensation expense (397 ) (438 ) (1,475 ) (1,504 )
 
Research and development, net
Non-cash stock-based compensation expense (988 ) (879 ) (3,597 ) (3,005 )
 
Selling, general and administrative
Objet intangible assets amortization expense (2,242 ) (2,242 ) (8,967 ) (8,967 )
Solidscape intangible assets amortization expense (133 ) (133 ) (533 ) (356 )
Non-cash stock-based compensation expense (5,187 ) (5,024 ) (21,592 ) (18,349 )
Solidscape acquisition expense - - - (615 )
Merger related expense   (2,497 )   -     (9,262 )   -  
(10,059 ) (7,399 ) (40,354 ) (28,287 )
 
Other income
Sale of an auction rate security - - - (626 )
Sale of an equity investment   -     -     -     (1,205 )
- - - (1,831 )
 
Income taxes
Tax expense related to non-GAAP adjustments   2,606     1,285     7,225     4,768  
       
Net income $ 19,774   $ 17,950   $ 81,165   $ 68,023  
 
Stratasys Ltd.
     
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
 
Fiscal Year 2013   Earnings (loss) Per Diluted Share Range
 
U.S. GAAP measure ($0.41) to ($0.16)
 

Adjustments

Stock-based compensation expense $0.49 to $0.55
Intangible assets amortization expense $1.45
Merger related expense $0.17 to $0.21
 
Non-GAAP estimate $1.80 to $1.95




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