Stratasys Reports Q3 Revenue And Earnings

Company Introduces 2006 Financial Guidance

MINNEAPOLIS—(BUSINESS WIRE)—Oct. 27, 2005— Stratasys, Inc. (Nasdaq: SSYS) today announced third quarter financial results.

Revenues rose 11% to $19.7 million for the third quarter ended September 30, 2005 over the $17.7 million recorded in the same quarter of the previous year. Net income was $2.2 million, or $0.20 per share, for the third quarter compared with net income of $2.5 million, or $0.24 per share, for the same quarter of the previous year. Total system shipments increased 24% to 306 units during the third quarter of 2005 compared with 246 units for the same period in 2004.

The third quarter generated record levels of consumables and maintenance revenue, as well as strong revenue growth in the company's 3D printer and paid parts businesses. Third quarter revenue growth and profitability were limited by a decline in the company's high-end system sales.

Revenues rose 17% to $59.3 million for the nine months ended September 30, 2005 over the $50.9 million recorded for the same period of the previous year. Net income grew 9% to $7.5 million, or $0.69 per share, for the nine-month period, compared with net income of $6.8 million, or $0.64 per share, for the same period in 2004. Total system shipments were 935 units for the nine-month period, compared with 818 units for the same period in 2004.

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

-- Revenue of $81 million to $83 million or growth of 15% to 18% over fiscal 2004.

-- Earnings of $0.94 to $0.97 per share or growth of 11% to 14% over fiscal 2004.

Stratasys released the following information regarding its financial guidance for the fiscal year ending Dec. 31, 2006:

-- Revenue of $98 million to $102 million or growth of 20% to 24% over fiscal 2005.

-- Earnings of $1.15 to $1.25 per share or growth of 20% to 31% over fiscal 2005.

"We continue to enjoy strong demand for our Dimension 3D printers, which is reflected in the 35 percent 3D printer unit growth we generated during the quarter. Moreover, the ongoing expansion of our installed base of systems is driving strong growth in our consumables and maintenance revenue," said Scott Crump, chairman and chief executive officer of Stratasys.

"Our paid parts business generated strong growth during the third quarter. The recent launch of, the world's largest rapid prototype and part building service, should provide an additional growth catalyst for the paid parts business going forward. RedEyeRPM(TM) employs a proprietary, secure quoting-and-ordering web engine that allows automated, instant quoting and ordering around the clock, seven days a week.

"We continue to develop new opportunities that go beyond product design and prototyping, as evidenced by the recent announcement of a $3.6 million initiative with a Fortune 100 global manufacturing company to advance Stratasys' proprietary FDM(R) technology for rapid manufacturing applications. The initiative's long-term goal is to develop our core technology and product line to allow for the manufacture of end-use parts. We believe rapid manufacturing could become a dominant growth driver for Stratasys in the future.

"Although high-end system sales were weaker during the third quarter, the company had a record quarter for order bookings, which grew by 27% over the same period last year. Our high-end system business is difficult to predict quarter-to-quarter. However, we are focused on long term results, and remain confident in our ability to successfully execute our core growth initiatives going forward," Crump concluded.

The company will hold a conference call to discuss these results on October 27, 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 800-839-6793 (or 402-220-6054 internationally).

A live webcast will be available through the Investor Relations section of the Stratasys Website ( 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; and offers rapid prototyping and manufacturing services. 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; or

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. Largest part-building service claim is based on number of dedicated machines. 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 PC-ABS 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 polyjet line; the success of our RedEye RPM service; 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



                                            September 30, December 31,
                                                2005          2004


Current assets
    Cash and cash equivalents                $25,463,758  $20,624,845
    Short-term investments                    20,000,000   35,225,000
    Accounts receivable, less allowance for
     returns and doubtful accounts of
     $1,584,909 in 2005 and $1,731,830 in
     2004                                     18,786,293   14,951,350
    Inventories                               11,135,080    7,520,422
    Net investment in sales-type leases        1,689,151    1,324,499
    Prepaid expenses                                                    1,585,649        1,756,494
        Deferred  income  taxes                                                455,000            455,000
                Total  current  assets                                    79,114,931      81,857,610

Property  and  equipment,  net                                      11,573,677      10,043,657

Other  assets
        Intangible  assets,  net                                          3,173,088        2,551,581
        Net  investment  in  sales-type  leases                2,587,771        2,693,830
        Deferred  income  taxes                                                354,000            354,000
        Long-term  investments                                            7,606,298            720,000
        Other                                                                            3,639,970            978,339
                                                                                            17,361,127        7,297,750

                                                                                        $108,049,735    $99,199,017


Current  liabilities
        Accounts  payable  and  other  current
          liabilities                                                            $7,798,514      $6,643,620
        Unearned  maintenance  revenue                              8,243,331        7,668,362
                Total  current  liabilities                          16,041,845      14,311,982

Stockholders'  equity

    Common  Stock,  $.01  par  value,  authorized
      15,000,000  shares,  issued  12,266,496
      shares  in  2005  and  12,211,835  shares  in
      2004                                                                                    122,665            122,118
      Capital  in  excess  of  par  value                          72,376,666      71,762,100
      Retained  earnings                                                    27,646,344      20,193,048
      Accumulated  other  comprehensive  income
        (loss)                                                                            (251,282)              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                        92,007,890      84,887,035

                                                                                        $108,049,735    $99,199,017



                                            Three  Months  Ended                Nine  Months  Ended
                                                  September  30,                          September  30,
                                            2005                  2004                  2005                  2004
                                      (unaudited)    (unaudited)    (unaudited)    (unaudited)

Net  Sales
  Product                      $15,524,258    $14,231,605    $47,251,970    $40,847,553
  Services                        4,157,221        3,489,577      12,077,273      10,035,452
                                        19,681,479      17,721,182      59,329,243      50,883,005

Cost  of  goods  sold
  Product                          7,486,431        6,213,106      21,251,235      17,480,183
  Sales                              1,362,673        1,063,897        3,682,178        2,772,955
                                          8,849,104        7,277,003      24,933,413      20,253,138

Gross  profit                10,832,375      10,444,179      34,395,830      30,629,867

Costs  and  expenses
    Research  and
      development              1,516,253        1,298,006        4,589,981        3,989,402
    Selling,  general
      and  admini-
      strative                    6,344,170        5,544,728      19,791,084      16,742,392
                                          7,860,423        6,842,734      24,381,065      20,731,794

Operating  income          2,971,952        3,601,445      10,014,765        9,898,073

Other  income
    Interest  income            416,339            190,888        1,231,921            427,119
    Interest  expense                                    (11,510)                                    (11,510)
    Other                                (93,718)            29,900          (405,171)          (41,113)
                                              322,621            209,278            826,750            374,496

  Income  before
    income  taxes              3,294,573        3,810,723      10,841,515      10,272,569

  Income  taxes                1,128,391        1,276,592        3,388,219        3,441,311

  Net  income                  $2,166,182      $2,534,131      $7,453,296      $6,831,258

Earnings  per  
  common  share
          Basic                              $0.21                $0.24                $0.71                $0.66
          Diluted                          $0.20                $0.24                $0.69                $0.64

Weighted  average
  number  of  common
          Basic                    10,467,160      10,374,686      10,496,470      10,326,113
          Diluted                10,785,292      10,752,647      10,837,344      10,726,411

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