Stratasys Reports Record Quarterly Revenue And Earnings

Company Reports Record System Shipments

MINNEAPOLIS—(BUSINESS WIRE)—July 28, 2005— Stratasys, Inc. (Nasdaq: SSYS) today announced the highest quarterly revenue, earnings and system shipments in the company's history.

Revenues rose 20% to $20.8 million for the second quarter ended June 30, 2005 over the $17.3 million recorded in the same quarter of the previous year. Net income grew 21% to $2.9 million, or $0.27 per share, for the second quarter compared with net income of $2.4 million, or $0.22 per share, for the same quarter of the previous year. Total system shipments increased 25% to 351 units during the second quarter of 2005 compared to 281 units for the same period in 2004.

The second quarter financial results included a $246,000 loss related to foreign currency translation caused by depreciation in the Euro versus the U.S. dollar. In addition, the second quarter tax liability was reduced by $325,000 as a result of discrete tax benefits.

Revenues rose 20% to $39.6 million for the six months ended June 30, 2005 over the $33.2 million recorded for the same period of the previous year. Net income grew 23% to $5.3 million, or $0.49 per share, for the six-month period, compared with net income of $4.3 million, or $0.40 per share, for the same period in 2004. Total system shipments were 628 units for the six-month period, compared with 572 units for the same period in 2004.

Stratasys released the following information regarding its financial guidance for the fiscal year ending Dec. 31, 2005:

-- The company reconfirms expected revenue of $84 million to $89 million or growth of 20% to 27% over fiscal 2004.

-- Operating margins are anticipated to be in the range of 18.5% to 20.5%, versus the previous target of 20% to 22%.

-- The tax rate, excluding discrete tax benefits, is expected to be 34% to 35% versus the previous estimate of 37% to 39%. The impact of the known discrete tax benefits will reduce the expected annual rate to 31% to 32%.

-- The company reconfirms its expected earnings of $1.07 to $1.12 per share or growth of 26% to 32% over fiscal 2004, which includes the second quarter discrete items.

"The second quarter generated record Dimension 3D Printer and maintenance revenue, as well as and strong growth in consumables revenue, all of which exceeded our expectations. This growth was partially offset by slower than expected sales of our high-end systems, particularly in Europe, as well as weaker than expected sales within our emerging paid parts business," said Scott Crump, chairman and chief executive officer of Stratasys.

"Operating margins for the second quarter reflect the ongoing investments we are making in new product and channel development. These investments, combined with a mix of system sales that favored our lower-margin products, including our Dimension 3D printers and Eden systems, offset the favorable margin impact of rapid growth in consumables and maintenance revenue during the quarter.

"Beyond our proven growth drivers, we continue to develop new opportunities, including our paid parts business, as well new initiatives targeting the emerging market for rapid manufacturing applications.

"Overall, we are pleased with our performance over the first six months of fiscal 2005, and we continue to expect strong growth for the balance of the year. We believe the growth in system sales over the first six months of 2005 reflects favorably on end-user demand for our products. In addition, the ongoing expansion of our installed base of systems should bode well for future growth in consumables and maintenance revenue," Crump concluded.

The company will hold a conference call to discuss these results on July 28, 2005 at 8:30 a.m. EDT. To access the call, dial 877-236-1078 (or 213-408-0663 internationally). The conference I.D. is "Stratasys." A recording of the call will be available for two weeks after the call. To access the recording, dial 800-862-9098 (or 785-424-1051 internationally).

A live webcast will be available through the Investor Relations section of the Stratasys Website ( www.stratasys.com). A replay of the webcast will be made available on the Stratasys Website for 90 days.

About Stratasys Inc.

Stratasys Inc., Minneapolis, manufactures office-based rapid prototyping systems and 3D printers. According to Wohlers Report 2005, the company supplied 36 percent of all systems installed worldwide in 2004, making it the unit market leader. Stratasys patented the rapid prototyping process known as fused deposition modeling (FDM). The process creates functional models directly from any 3D CAD program using ABS plastic, polycarbonate, and PPSF. The company holds 175 granted or pending rapid prototyping patents. Stratasys products are used in the aerospace, defense, automotive, medical, education, electronic, and consumer product industries. The company's systems are also used for rapid manufacturing and rapid tooling applications. For more information on the company, go to www.Stratasys.com or www.DimensionPrinting.com.

(Financial Tables follow)

All statements herein that are not historical facts or that include such words as "expects", "anticipates", "projects", "estimates" or "believes" or similar words are forward-looking statements that we deem to be covered by and to qualify for the safe harbor protection covered by 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 the continued market acceptance and growth of our Dimension BST(TM), Dimension SST(TM), Prodigy Plus, FDM Maxum(TM), FDM Vantage(TM), and Titan(TM) product lines; the size of the 3D printing market; 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 and market new materials such as polyphenylsulfone and the market acceptance of this and other materials; the impact of competitive products and pricing; the timely development and acceptance of new products and materials; our ability to effectively and profitably market and distribute the Eden line; and the other risks detailed from time to time in our SEC Reports, including the annual report on Form 10-K for the year ended December 31, 2004 and the quarterly reports on Form 10-Q filed throughout 2005.

This release is also available on the Stratasys Web site at www.Stratasys.com.

STRATASYS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


----------------------------------------------------------------------
                         Three Months               Six Months
                        Ended June 30,            Ended June 30,
                        --------------            --------------
                       2005         2004         2005         2004
                   (unaudited)  (unaudited)  (unaudited)  (unaudited)
----------------------------------------------------------------------

Net Sales
 Product           $16,904,541  $13,694,776  $31,727,712  $26,615,948
 Services            3,880,404    3,620,872    7,920,052    6,545,875
                   ------------------------- -------------------------
                    20,784,945   17,315,648   39,647,764   33,161,823
                   ------------------------- -------------------------


Cost of goods sold
 Product             7,466,598    5,900,967   13,764,804   11,267,076
 Sales                       1,129,328            935,128        2,319,505        1,709,059
                                      -------------------------  -------------------------
                                          8,595,926        6,836,095      16,084,309      12,976,135
                                      -------------------------  -------------------------

Gross  profit                12,189,019      10,479,553      23,563,455      20,185,688
                                      -------------------------  -------------------------

Costs  and  expenses
    Research  and
      development              1,687,140        1,345,067        3,073,728        2,691,396
    Selling,  general
      and
      administrative        6,853,228        5,605,591      13,446,914      11,197,664
                                      -------------------------  -------------------------
                                          8,540,368        6,950,658      16,520,642      13,889,060
                                      -------------------------  -------------------------

Operating  income          3,648,651        3,528,895        7,042,813        6,296,628
                                      -------------------------  -------------------------

Other  income
  (expense)
    Interest  income            438,104            124,484            815,582            236,231
    Other                              (342,912)          (34,980)        (311,453)          (71,013)
                                      -------------------------  -------------------------
                                                95,192              89,504            504,129            165,218
                                      -------------------------  -------------------------

  Income  before
    income  taxes              3,743,843        3,618,399        7,546,942        6,461,846

  Income  taxes                    852,681        1,226,381        2,259,828        2,164,719
                                      -------------------------  -------------------------

  Net  income                  $2,891,162      $2,392,018      $5,287,114      $4,297,127
                                      -------------------------  -------------------------

Earnings  per
  common  share
          Basic                              $0.28                $0.23                $0.51                $0.42
                                      -------------------------  -------------------------
          Diluted                          $0.27                $0.22                $0.49                $0.40
                                      -------------------------  -------------------------

Weighted  average
  number  of  common
  shares
  outstanding
          Basic                    10,451,351      10,331,963      10,466,981      10,301,560
                                      -------------------------  -------------------------
          Diluted                10,779,798      10,771,375      10,827,926      10,716,031
                                      -------------------------  -------------------------


STRATASYS,  INC.

CONSOLIDATED  BALANCE  SHEETS


----------------------------------------------------------------------
                                                                                            June  30,        December  31,
                                                                                                2005                    2004
                                                                                          (unaudited)
----------------------------------------------------------------------

ASSETS

Current  assets
        Cash  and  cash  equivalents                                $32,436,569    $20,624,845
        Short-term  investments                                        20,000,000      35,225,000
        Accounts  receivable,  less  allowance  for
          returns  and  doubtful  accounts  of
          $1,462,530  in  2005  and  $1,731,830  in
          2004                                                                          19,174,535      14,951,350
        Inventories                                                              10,167,018        7,520,422
        Net  investment  in  sales-type  leases                1,554,761        1,324,499
        Prepaid  expenses                                                      2,536,841        1,756,494
        Deferred  income  taxes                                                455,000            455,000
                                                                                        -------------  ------------
                Total  current  assets                                    86,324,724      81,857,610
                                                                                        -------------  ------------


Property  and  equipment,  net                                      10,932,828      10,043,657
                                                                                        -------------  ------------

Other  assets
        Intangible  assets,  net                                          2,886,961        2,551,581
        Net  investment  in  sales-type  leases                2,557,656        2,693,830
        Deferred  income  taxes                                                679,000            354,000
        Long-term  investments                                            3,314,340            720,000
        Other                                                                                869,324            978,339
                                                                                        -------------  ------------
                                                                                            10,307,281        7,297,750
                                                                                        -------------  ------------

                                                                                        $107,564,833    $99,199,017
                                                                                        -------------  ------------

LIABILITIES  AND  STOCKHOLDERS'  EQUITY

Current  liabilities
        Accounts  payable  and  other  current
          liabilities                                                            $9,763,621      $6,643,620
        Unearned  maintenance  revenue                              7,968,641        7,668,362
                                                                                        -------------  ------------
                Total  current  liabilities                          17,732,262      14,311,982
                                                                                        -------------  ------------

Stockholders'  equity
    Common  Stock,  $.01  par  value,  authorized
      15,000,000  shares,  issued  12,262,296
      shares  in  2005  and  12,211,835  shares  in
      2004                                                                                    122,622            122,118
      Capital  in  excess  of  par  value                          72,374,890      71,762,100
      Retained  earnings                                                    25,480,162      20,193,048
      Accumulated  other  comprehensive  income
        (loss)                                                                            (258,600)              5,910
      Less  cost  of  treasury  stock,  1,796,929
        shares  in  2005  and  1,770,026  shares  in
        2004                                                                            (7,886,503)    (7,196,141)
                                                                                        -------------  ------------
                Total  stockholders'  equity                        89,832,571      84,887,035
                                                                                        -------------  ------------

                                                                                        $107,564,833    $99,199,017
                                                                                        -------------  ------------
 


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