Stratasys Reports Fourth Quarter and Full Year Financial Results

Q4 Cash Flow from Operations Exceeds $11 Million

Company Begins 2010 With Record System Backlog

MINNEAPOLIS — (BUSINESS WIRE) — February 17, 2010 — Stratasys, Inc. (Nasdaq: SSYS) today announced fourth quarter and full year financial results.

Revenue was $26.2 million for the fourth quarter ended December 31, 2009 as compared with $31.9 million reported for the same period in 2008. System shipments totaled 431 units for the fourth quarter of 2009, as compared with 570 for the same period last year.

Net income was $2.4 million for the fourth quarter, or $0.12 per share, compared to net income of $2.0 million, or $0.10 per share, for the same period last year.

Non-GAAP net income, which excludes certain discrete items and stock-based compensation expense, was $2.9 million, or $0.14 per share, for the fourth quarter of 2009 compared to $3.2 million, or $0.16 per share, for the same period last year.

Revenue was $98.4 million for the twelve-month period ended December 31, 2009 versus $124.5 million reported for the same period in 2008. System shipments totaled 1,918 units for the twelve-month period of 2009, versus 2,184 for the same period last year.

Net income was $4.1 million for the twelve-month period of 2009, or $0.20 per share, compared to net income of $13.6 million, or $0.65 per share, for the same period last year.

Non-GAAP net income, which excludes certain discrete items and stock-based compensation expense, was $5.7 million, or $0.28 per share, for the twelve-month period ended December 31, 2009 compared to $16.0 million, or $0.76 per share, for the same period last year.

Cash flow from operations totaled $11.3 million and $25.5 million for the fourth quarter and twelve-month periods in 2009, respectively. The company had $70.9 million in cash and investments as of the end of December 2009.

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 impairment charges, restructuring expenses, as well as the stock-based compensation expenses used to determine non-GAAP financial measures.

“We are pleased with our fourth quarter performance considering the difficult economic environment,” said Scott Crump, chairman and chief executive officer of Stratasys. “We observed an improvement in business conditions during the quarter as customers have become more confident in an economic recovery and willing to increase spending. System orders in December were notably strong, leading to a record system backlog of $6.3 million.

“Our margins for the fourth quarter improved over the same quarter last year and sequentially, driven by the relatively strong sales of our high-margin consumables. The growth in consumables during the quarter was significant, given that it represents the first positive sales growth for consumables in twelve months. Our margins also benefited from the cost-saving measures we implemented in early 2009, and our successful initiative to lower the manufacturing cost of our uPrint 3D printers.

“Cash flow continues to be exceptionally strong as we generated over $11 million and over $25 million in cash from operations during the fourth quarter and full year, respectively. This was a significant accomplishment considering the difficult year, but is also a credit to the hard work of our finance and operations teams in better managing our working capital. Our total cash and investment position increased to $71 million as of the end of 2009 as compared with $48 million at the end of 2008.

“We finished 2009 encouraged by the positive trends within our markets and emboldened by our new strategic initiatives – we believe that we are well-positioned coming out of the recession. We believe the growth trend in consumables combined with our record year-end backlog suggest a building of positive momentum. Our indirect distribution model for Fortus systems in North America is beginning to generate positive results, and despite the difficult operating environment in 2009, our margins expanded in the fourth quarter and we strengthened our financial position.

“Throughout 2009 we communicated our goal of significantly expanding our distribution footprint within 3D printing. In a major strategic step to meet that goal, we recently announced a game-changing agreement with HP for the worldwide distribution of Stratasys developed and manufactured 3D printers. We believe the agreement represents a major inflection point in advancing our 3D printing strategy worldwide. In addition, we believe HP’s decision is confirmation that a significant market opportunity exists among the millions of designers that are using 3D CAD today.

“HP’s proven track record in our market as the established sales leader for 2D design plotters makes them an ideal candidate for collaboration within 3D printing. We can now leverage our industry-leading FDM technology with HP’s brand awareness and extensive sales and marketing organization. HP will begin the rollout of an HP-brand 3D printer later this year, and we are on track to begin shipment of those products in the coming months. We believe this agreement will ultimately allow us to realize the full sales potential within 3D printing.

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