Stratasys Reports Third Quarter Financial Results

Revenue of $30.3 Million and GAAP EPS of $0.15 per Share

MINNEAPOLIS — (BUSINESS WIRE) — October 26, 2010 — Stratasys, Inc. (NASDAQ: SSYS) today announced third quarter financial results.

The company reported revenue of $30.3 million for the third quarter ended September 30, 2010, a 24% increase over the $24.3 million reported for the same period in 2009. System shipments for the third quarter totaled a record 631 units, a 39% increase over the 454 for the same period last year.

The company reported net income of $3.2 million for the third quarter, or $0.15 per share, compared to net income of $1.6 million, or $0.08 per share, for the same period last year.

Non-GAAP net income, which excludes stock-based compensation expense, was $3.4 million, or $0.16 per share, for the third quarter of 2010 compared to $1.8 million, or $0.09 per share, for the same period last year.

Revenue was $83.3 million for the nine-month period ended September 30, 2010, compared to $72.1 million reported for the same period in 2009. System shipments totaled a record 1,923 units for the nine-month period, a 29% increase over the 1,487 units shipped during the same period last year.

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, and 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 nine-month period, which excludes the warrant charge, was $88.3 million, a 22% increase over the $72.1 million reported for the same period in 2009.

Net income was $5.1 million for the nine-month period, or $0.24 per share, compared to net income of $1.7 million, or $0.09 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 $8.9 million, or $0.42 per share, for the nine-month period of 2010 compared to $2.8 million, or $0.14 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.

“The third quarter results represent the continuation of an improvement in business conditions within our core markets,” said Scott Crump, chairman and chief executive officer of Stratasys. “In addition, the third quarter represents a building of positive momentum within our business when you consider the seasonal weakness that is typical during the period. Reflecting this momentum, our 3D printer and Fortus system revenue grew by 26% and 39%, respectively. We are very pleased with our financial performance.

“Our game-changing collaboration with HP continues to generate positive results. HP orders remained strong during the third quarter and end-customer demand for their new Designjet 3D printer continued to build. The unit sales of Designjet in markets served by HP were more than double the comparable uPrint sales generated within those markets last year, an impressive achievement. Within HP markets, total 3D printer unit volume, which includes the Designjet, expanded by 88% over 2009.

“We believe HP’s distribution capabilities can significantly expand the unit system sales of our 3D printers over the long term. The HP brand and marketing muscle have the potential to drive increased awareness and product adoption. Although HP is using its initial launch in Europe to refine a go-to-market strategy and better understand the 3D printing market, it has an deep understanding of the end customer and the market’s potential. HP has communicated its desire to move into additional markets, and we are optimistic about expanding the collaboration in the future.

“Our consumable revenue grew by 34% during the third quarter over 2009, the fastest quarterly growth rate within the past three years. The growth is being driven by a rebound in customer usage, as well as the positive impact from our growing installed base of systems. We believe this positive momentum can be sustained, as channel surveys suggest consumable usage is accelerating, and reseller inventories remain relatively tight. In addition, the 39% growth in system units for the third quarter bodes well for future growth in consumable revenue.

“Fortus system sales growth during the third quarter was driven by the ongoing economic recovery, as well as the incremental demand created by emerging direct digital manufacturing, or DDM, applications. The aerospace industry remains a leading innovator in using our technology for DDM. We recently worked with Delta Airlines to provide a DDM solution to address a priority maintenance issue on approximately 200 of their aircraft. This unique application will include several hundred end-use parts made on Fortus systems using our high-temperature ULTEM material.

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