Stratasys Reports Record Quarterly Revenue And Earnings
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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
                                            ------------- ------------




Contact:
Stratasys, Inc., Minneapolis
Investor Relations:
Shane Glenn, 952-294-3416

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