Stratasys Reports Second Quarter Financial Results

Company Achieves Record Consumable Revenue and System Shipments

MINNEAPOLIS — (BUSINESS WIRE) — July 28, 2010 — Stratasys, Inc. (NASDAQ: SSYS) today announced second quarter financial results.

The company reported revenue of $30.1 million for the second quarter ended June 30, 2010, a 22% increase over the $24.6 million reported for the same period in 2009. System shipments totaled a record 682 units for the second quarter of 2010, compared to the 442 shipped during the same period last year.

The company reported net income of $2.3 million for the second quarter, or $0.11 per share, compared to a net income of $850,000, or $0.04 per share, for the same period last year.

Non-GAAP net income, which excludes stock-based compensation expense, was $2.6 million, or $0.12 per share, for the second quarter of 2010 compared to $1.0 million, or $0.05 per share, for the same period last year.

Revenue was $53.1 million for the six-month period ended June 30, 2010, compared to $47.8 million reported for the same period in 2009. System shipments totaled a record 1,291 units for the six-month period, a 25% increase over the 1,033 shipped during the same period last year.

The six-month period in 2010 included a $5.0 million one-time non-cash charge against revenue. The charge against revenue represents the fair value of a warrant issued to HP (NYSE: HPQ) for 500,000 shares of Stratasys, Inc. common stock, in connection with the distribution agreement signed in January 2010.

Non-GAAP revenue for the six-month period, which excludes the warrant charge, was $58.1 million, a 22% increase over the $47.8 million reported for the same period in 2009.

Net income was $1.9 million for the six-month period, or $0.09 per share, compared to net income of $146,000, or $0.01 per share for the same period last year.

Non-GAAP net income, which excludes the warrant charge, certain discrete items and stock-based compensation expense, was $5.5 million, or $0.26 per share, for the six-month period of 2010 compared to $1.0 million, or $0.05 per share, for the same period last year.

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.

“Our strong second quarter results reflect a continuation of the positive trends we observed last quarter, as our core markets are responding favorably to the economic recovery,” said Scott Crump, chairman and chief executive officer of Stratasys. “The second quarter generated record levels of consumable revenue and system unit sales, which increased by 25% and 54% over last year, respectively. In addition, our 3D printer system revenue grew by 56%, and was driven by strong sales of our Stratasys-brand products, as well at the new HP Designjet line.

“We are pleased with the progress of our game-changing collaboration with HP, as they began shipping the new Designjet 3D printer line to customers across five European countries during the second quarter. HP’s orders for the Designjet line exceeded their original forecast during the second quarter, driven by strong sales to end-users.

“While sales to HP during this phase of the agreement remain relatively small as expected, we are seeing the early signs of success, and are cautiously optimistic about the implications for expanding the collaboration in 2011. We are currently preparing for the next phase of the agreement, which includes planning for an expansion in our capacity, as well as a dramatic evolution in our product line.

“In a separate agreement, we are pleased to announce that we formally extended our collaboration with an unnamed Fortune 500 partner to develop new platforms for DDM applications. The contract extension includes additional funds to further develop our line of Fortus 3D production systems. We are excited that this industry-leading company shares our vision and recognizes the potential of our FDM technology for manufacturing end-use parts.

“We are encouraged by the positive trends in our business during the second quarter, and we enter the third quarter with a strong system pipeline. We are optimistic about the early successes of our OEM agreement with HP and about the potential expansion of this relationship in 2011. In addition, incremental growth opportunities continue to develop within our Fortus line of 3D production systems. We believe our future remains bright,” Crump concluded.

The company plans to hold a conference call to discuss its second quarter financial results on Wednesday, July 28, 2010 at 8:30 a.m. (ET). The investor conference call will be available via live webcast on the Stratasys Web site at www.stratasys.com under the "Investors" tab; or directly at the following web address: http://phx.corporate-ir.net/playerlink.zhtml?c=61402&s=wm&e=3223468.

To participate by telephone, the domestic dial-in number is 800-299-7089 and the international dial-in is 617-801-9714. The access code is 75582905. Investors are advised to dial into the call at least ten minutes prior to the call to register. The webcast will be available for 90 days on the "Investors" page of the Stratasys Web site or at the provided web address.

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