Stratasys Inc. (SSYS)

Q2 2010 Earnings Conference Call

July 28, 2010 8:30 AM ET


Shane Glenn - Director of IR

Scott Crump - Chairman and CEO

Bob Gallagher - CFO


Troy Jensen - Piper Jaffray

Steve Dyer - Craig-Hallum

Brian Drab - William Blair

Chad Bennett - Northland Capital Market

Graeme Rein - Bears Capital

Jim Ricchiuti - Needham & Company

Chuck Murphy - Sidoti & Company

Andy Schopick - Nutmeg Securities

Ryan Thibodeaux - Maple Leaf Partners

David Trossman - MTB Advisors



Good day ladies and gentlemen and welcome to the second quarter 2010 Stratasys earnings conference call. My name is Brandy and I 'll be your operator for today. [Operator Instructions] I 'll turn the call to Mr. Shane Glenn, Director of Investor Relations. Please proceed sir.

Shane Glenn

Good morning and welcome to the Stratasys conference call to discuss our second quarter financial results. Representing Stratasys 's executive management on the conference call today is the Chairman and CEO of Stratasys, Scott Crump and CFO Bob Gallagher.

A quick reminder, that today 's conference call is being transmitted over the Web and can be accessed through our Investor section of our Web site at or directly by accessing the link provided in our press release.

We will begin with the Safe Harbor statement. All statements herein that are not historical facts or that includes such words as expects, anticipates, projects, estimates, vision, planning, could, plan, 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, and our Fortus 3D production systems, particularly for use in direct digital manufacturing; our agreement with HP to expand the distribution and sales of our 3D printers, our WaveWash support removal system, the demand for proprietary consumables; the expansion of our paid parts service and our beliefs with respect to the growth and demand for our products.

Other risks and uncertainties that may affect our business include our ability to penetrate the 3D printing market; our ability to maintain the growth rates experienced in this and preceding quarters; our ability to introduce, produce and market new materials such as ULTEM 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 RedEye on demand and 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 obligations to do so even if our beliefs and expectations change.

In addition to the statements described above, such forward looking statements include 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.

Information discussed within this conference call includes financial results that are in accordance with US generally accepted accounting principles or GAAP. In addition, non-GAAP financial measures are included that exclude certain expenses. The non-GAAP financial measures are provided in an effort to give information that the investors may deem relevant to the company 's operations and comparative performance, primarily the identification and exclusion of expenses associated with warrant charge, restructuring expenses and expenses associated with stock based compensation.

The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods. The appropriate reconciliations between non-GAAP and GAAP financial measures are provided in a table at the end of our press release.

Now I 'd like to turn the call over to our CEO, Scott Crump.

Scott Crump

Good morning and thank you for joining us to discuss our second quarter financial results. During the first quarter, we entered into a gain changing exclusive agreement with HP for the worldwide distribution of our 3D printers.

During the second quarter, HP began marketing and shipping those products to end customers. We 're excited to report that HP exceeded their initial order forecast for the second quarter and reported strong sales through to end users. We are pleased with this progress and have become more optimistic about expanding the relationship in the future.

Consequently, we 've begun to plan for the next phase of our collaboration with HP. In addition to the progress we made with HP, we are pleased to see a continue improvement in business conditions across our core markets during the second quarter. Total revenue for products and services increased by 22% over the last year, led by a 56% increase in 3D printer system revenue.

In addition, our consumable revenue grew by an impressive 25% to a record level during the second quarter. Our system unit sales also represented a quarterly record growing by 54% over last year.

We were proud to launch our new WaveWash easy to use, automated support removal system that further uniquely differentiates Stratasys competitively. Within Fortus, we continue to maintain a strong pipeline of orders driven by the improvement in business conditions within our core markets.

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