Stratasys Reports Record Quarterly Financial Results

Fortus System Revenue More than Doubles in Q3

MINNEAPOLIS — (BUSINESS WIRE) — October 26, 2011 — Stratasys, Inc. (NASDAQ: SSYS) today announced third quarter financial results.

The company reported record revenue of $39.7 million for the third quarter ended September 30, 2011, a 31% increase from the $30.3 million reported for the same period last year.

System shipments totaled 600 units for the third quarter of 2011, compared to 631 units for the same period last year.

The company reported net income of $5.9 million for third quarter, or $0.27 per share, compared to $3.2 million, or $0.15 per share, for the same period last year.

Non-GAAP net income, which excludes certain discrete items and stock-based compensation expense, was $5.8 million for the third quarter, or $0.27 per share, representing a 69% increase over the non-GAAP net income of $3.4 million, or $0.16 per share, for the same period last year.

Solidscape Inc., acquired by Stratasys in April, contributed $2.9 million to revenue and 61 systems, and was slightly accretive to net income during the third quarter of 2011.

The company reported revenue of $111.6 million for the nine-month period ended September 30, 2011, compared to $83.3 million reported for the same period in 2010.

The nine-month period in 2010 included a $5.0 million one-time non-cash charge against revenue. The charge against revenue was taken in the first quarter of 2010 and represents the fair value of a warrant issued to HP in connection with the distribution agreement signed in January 2010.

System shipments totaled 1,902 units for the nine-month period in 2011, compared to 1,923 units for the same period last year.

The company reported net income of $14.8 million for the nine-month period, or $0.68 per share, compared to net income of $5.1 million, or $0.24 per share, for the same period last year.

Non-GAAP net income, which excludes the warrant charge, discrete items and stock-based compensation expense, was $15.3 million or $0.71 per share for the nine-month period of 2011, compared to non-GAAP net income of $8.9 million, or $0.42 per share, for the same period last year.

Solidscape Inc. contributed $5.0 million in revenue and 106 systems, and had a slight negative impact to net income during the nine-month period of 2011.

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.

“The third quarter, which is typically a seasonally weak period for Stratasys, represented our second consecutive record quarterly performance,” said Scott Crump, chairman and chief executive officer of Stratasys. “Revenue and profitability reached the highest levels in our company’s history, driven by the sales of our higher-margin products. Notably, operating profit nearly doubled during the third quarter, and as percentage of sales, it reached the highest level in seven years.

“Our higher-priced Fortus line continues to drive our growth and strong margin expansion, as Fortus system revenue more than doubled during the third quarter over last year. This growth was a result of strong sales across our entire Fortus line, which included the successful introduction of the Fortus 250mc. The highly affordable 250mc, which combines the higher functionality of a Fortus 3D production system with the ease-of-use of a Dimension 3D printer, filled a void in our Fortus product line. The new product represents the highest margin system in our portfolio, and was our best-selling system during the third quarter.

“Consumables revenue continued to grow impressively during the third quarter, increasing by 26% over last year, and 19% when you exclude the effect of our recent acquisition of Solidscape. The Fortus line is driving a disproportionately higher amount of this growth given the product line’s rapidly growing installation base and relatively higher material consumption. Customers using their Fortus equipment for direct digital manufacturing applications, or DDM, remain a primary driver behind this growth. We expect this trend will continue within the Fortus line, which we believe bodes well for future consumable sales.

“The unique capabilities of our Fortus line are having a positive impact on our RedEye paid parts business, which grew by 19% in the third quarter over last year. RedEye has recently added several large format Fortus 900mc 3D production systems. These systems can produce very large parts in seven durable thermoplastic materials. The systems were added to address the growing demand for large functional prototypes and DDM parts. The 900mc is uniquely positioned to address those types of applications.

“Although we are generating record results, we continue to observe a significant untapped sales potential within the Dimension and uPrint 3D printer lines. We continue to manufacture an HP-branded 3D printer which HP distributes in all major Western European markets. However, our primary focus has turned to developing independent channel strategies that will augment our HP collaboration. We believe our new channel and product initiatives will accelerate the sales of our 3D printers in 2012, and allow us to better capitalize on this significant untapped market opportunity.

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