Stratasys Releases Fourth Quarter and Full Year 2017 Financial Results

Fourth Quarter Revenue Increased 2% to $179.3 million compared to
same period last year

Fourth Quarter GAAP net loss of $10.0 million, or ($0.19) per diluted
share, and non-GAAP net income of $8.4 million, or $0.16 per diluted
share

Company releases full year 2018 earnings guidance

Announces new internally-developed metal additive manufacturing
platform

MINNEAPOLIS & REHOVOT, Israel–(BUSINESS WIRE)–Stratasys
Ltd. (NASDAQ: SSYS), a global leader in applied additive technology
solutions, announced financial results for the fourth quarter and full
year 2017.

Q4 2017 Financial Results Summary:

Revenue for the fourth quarter of 2017 was $179.3 million, compared to
$175.3 million for the same period last year.

• GAAP gross margin was 48.7% for the quarter, compared to a GAAP gross
  margin of 47.3% for the same period last year.
• Non-GAAP gross margin was 52.5% for the quarter, compared to 53.6% for
  the same period last year.
• GAAP operating loss for the quarter was $6.0 million, compared to a
  loss of $29.2 million for the same period last year.
• Non-GAAP operating income for the quarter was $13.5 million, compared
  to $11.6 million for the same period last year.
• GAAP net loss for the quarter was $10.0 million, or ($0.19) per
  diluted share, compared to a loss of $14.8 million, or ($0.30) per
  diluted share, for the same period last year.
• Non-GAAP net income for the quarter was $8.4 million, or $0.16 per
  diluted share, compared to Non-GAAP net income of $7.8 million, or
  $0.15 per diluted share, reported for the same period last year.
• Net R&D expenses for the quarter amounted to $26.6 million,
  representing 14.8% of net revenues.
• The Company generated $21.0 million in cash from operations during the
  fourth quarter and ended the period with $328.8 million in cash and
  cash equivalents.

Fiscal 2017 Financial Results Summary:

• Revenue for fiscal 2017 was $668.4 million compared to $672.5 million
  for fiscal 2016.
• GAAP operating loss for fiscal 2017 was $30.5 million, compared to a
  loss of $86.7 million for fiscal 2016.
• Non-GAAP operating income was $36.7 million, compared to $29.0 million
  for fiscal 2016
• GAAP net loss for fiscal 2017 was $40.0 million, or ($0.75) per
  diluted share, compared to a loss of $77.2 million, or ($1.48) per
  diluted share, for fiscal 2016.
• Non-GAAP net income for fiscal 2017 was $24.2 million, or $0.45 per
  diluted share, compared to non-GAAP net income of $14.8 million, or
  $0.28 per diluted share, reported for fiscal 2016.
• The Company generated $61.9 million in cash from operations in fiscal
  2017.

“Our fourth quarter results reflect the momentum that we built
throughout the year, which we attribute to the positive market reaction
to several new product introductions, including our F123 Series launched
in February, 2017 and the more recently commercialized H2000 and J700
Dental Solutions, as well as investments in specific go-to-market
initiatives for our target verticals of aerospace, automotive, and
healthcare,” said Ilan Levin, Chief Executive Officer of Stratasys. “Our
improved profitability and healthy cash generation in the quarter
demonstrates the success of our alignment of resources to support our
strategic roadmap.”

New Metal Technology

For nearly 30 years Stratasys has been pioneering the development and
adoption of 3D printing and additive manufacturing technologies,
including the precise, repeatable, and reliable FDM and PolyJet 3D
printing platforms.

Building on its track record of innovation and leadership, Stratasys is
today revealing the development of a new additive manufacturing process,
designed from inception to address short-run metal manufacturing.

The innovative Stratasys platform was developed internally over the past
several years, incorporating the Company’s proprietary jetting
technology. The platform was designed from inception to provide the
values of additive manufacturing for short-run production, while
overcoming material limitations of currently available metal-based
additive manufacturing systems. With this new technology, Stratasys
believes it will offer customers a new ability to short-run manufacture
metal parts made with commonly used powder metallurgy, starting with
aluminum, at an economically competitive cost-per-part and throughput,
with easy to implement post-processing and high part quality.

For more information, please reference the
separate press release issued today by the Company.

The Company will unveil further details about this new technology at the
RAPID + TCT 3D Printing and Additive Manufacturing Conference, taking
place from April 23-26 in Fort Worth, Texas.

Beginning in 2018, the Company is ramping up investment activity to
accelerate long term development programs to expand its addressable
markets, including the new metal additive manufacturing platform, as
well as further advancements based on FDM and PolyJet technologies.

“Following a period of incubation over the last several years, we are
excited to share details of our technology roadmap, which we believe
will deliver the promise of additive manufacturing to short-run metal
part production,” continued Levin. “As a pioneer and leader in the
additive manufacturing industry, Stratasys is increasing its investments
in the development of innovative technologies and application knowledge
to drive adoption through deeper customer engagement.”

Financial Guidance:

Stratasys today provided the following information regarding the
company’s guidance for projected revenue and net income for the fiscal
year ending December 31, 2018:

• Revenue guidance of $670 to $700 million.
• Non-GAAP net income of $16 to $27 million, or $0.30 to $0.50 per
  diluted share.
• GAAP net loss of $41 to $25 million, or ($0.75) to ($0.46) per diluted
  share.

Stratasys provided the following additional guidelines regarding the
company’s projected performance and strategic plans for 2018:

• Non-GAAP operating margins of 4.5% to 6%.
• Capital expenditures are projected at $40 to $50 million.

The Company’s guidance reflects increased investments in R&D, tools,
materials, and additional resources aimed at expanding addressable
markets by accelerating development efforts for the new metal additive
manufacturing platform, further advancements based on our FDM and
PolyJet technologies, and specific go-to-market initiatives in order to
deepen customer engagement.

Given the expected ongoing negative impact of not recording a tax
benefit on U.S. tax losses on the Company’s non-GAAP net income, the
Company believes that the rate of growth in its non-GAAP operating
income will be the best measure of performance.

Non-GAAP earnings guidance excludes $32 to $34 million of projected
amortization of intangible assets; $17 to $19 million of share-based
compensation expense; and $7 to $9 million in reorganization and other
related costs; and includes $4 to $5 million in tax expenses related to
non-GAAP adjustments.

Stratasys Ltd. Q4 and Full Year 2017 Conference Call Details

The Company plans to hold the conference call to discuss its fourth
quarter and full year financial results on Wednesday, February 28, 2018
at 8:30 a.m. (ET).

The investor conference call will be available via live webcast on the
Stratasys website at www.stratasys.com
under the “Investors” tab; or directly at the following web address: https://edge.media-server.com/m6/p/cvm4w4jn.

To participate by telephone, the domestic dial-in number is (866)
394-5776 and the international dial-in is (409) 350-3596. The access
code is 92508829.

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 by accessing the
provided web address.

Stratasys
(NASDAQ: SSYS) is a global leader in applied additive technology
solutions for industries including Aerospace, Automotive, Healthcare,
Consumer Products and Education. For nearly 30 years, a deep and ongoing
focus on customers’ business requirements has fueled purposeful
innovations—1,200 granted and pending additive technology patents to
date—that create new value across product lifecycle processes, from
design prototypes to manufacturing tools and final production parts. The
Stratasys 3D printing ecosystem of solutions and expertise—advanced
materials; software with voxel level control; precise, repeatable and
reliable FDM and PolyJet 3D printers; application-based expert services;
on-demand parts and industry-defining partnerships—works to ensure
seamless integration into each customer’s evolving workflow. Fulfilling
the real-world potential of additive, Stratasys delivers breakthrough
industry-specific applications that accelerate business processes,
optimize value chains and drive business performance improvements for
thousands of future-ready leaders around the world.

Corporate Headquarters: Minneapolis, Minnesota and Rehovot, Israel.

Online at: www.stratasys.com,
http://blog.stratasys.com
and LinkedIn.

Stratasys and Fortus are registered trademarks and the Stratasys signet
is a trademark of Stratasys Ltd. and/or its subsidiaries or affiliates.
All other trademarks are the property of their respective owners.

Cautionary Statement Regarding Forward-Looking Statements

The statements in this press release regarding Stratasys’ strategy, and
the statements regarding its projected future financial performance,
including the financial guidance concerning its expected results for
2018, are forward-looking statements reflecting management’s current
expectations and beliefs. These forward-looking statements are based on
current information that is, by its nature, subject to rapid and even
abrupt change. Due to risks and uncertainties associated with Stratasys’
business, actual results could differ materially from those projected or
implied by these forward-looking statements. These risks and
uncertainties include, but are not limited to: the degree of market
acceptance of our 3D printers, high-performance systems and consumables,
and the software and technology included in those systems; potential
declines in the demand for, or the prices of, our products and services,
or volume of our sales, due to decreased demand either for them
specifically or in the 3D printing market generally; potential further
charges against earnings that we could be required to take due to
impairment of additional goodwill or other intangible assets; potential
shifts in our product mix to lower-margin products or in our revenues
mix towards our AM services business; any failure to adequately adapt
our infrastructure and properly integrate the internal and external
sources of our growth to generate intended benefits (including from the
companies that we recently acquired); the impact of competition and new
technologies; risks related to our relationships with our suppliers,
resellers and independent sales agents, and our operations at our
manufacturing sites; risks related to the international scope of our
operations and regulatory compliance (including reporting,
environmental, anti-corruption and other regulatory compliance) related
to that scope of operations; risks related to the security of our
information systems (including risks related to potential
cyber-attacks); changes in the overall global economic environment or in
political and economic conditions in the countries in which we operate;
changes in our strategy; costs and potential liability relating to
litigation and regulatory proceedings; and those additional factors
referred to in Item 3.D “Key Information – Risk Factors”, Item 4,
“Information on the Company”, Item 5, “Operating and Financial Review
and Prospects,” and all other parts of our Annual Report on Form 20-F
for the year ended December 31, 2017 (the “2017 Annual Report”),
which report is being filed with the Securities and Exchange Commission
(the “SEC”) on the same day on which this press release is being
issued. Readers are urged to carefully review and consider the various
disclosures made throughout our 2017 Annual Report and our other reports
filed with or furnished to the SEC, which are designed to advise
interested parties of the risks and factors that may affect our
business, financial condition, results of operations and prospects. Any
guidance provided, and other forward-looking statements made, in this
press release are made as of the date hereof, and Stratasys undertakes
no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.

Use of non-GAAP financial measures

The non-GAAP data included herein, which excludes certain items as
described below, are non-GAAP financial measures. Our management
believes that these non-GAAP financial measures are useful information
for investors and shareholders of our Company in gauging our results of
operations (x) on an ongoing basis after excluding merger and
acquisition related expense and reorganization-related charges, and (y)
excluding non-cash items such as stock-based compensation expenses,
acquired intangible assets amortization, impairment of goodwill and
other long-lived assets, changes in fair value of obligations in
connection with acquisitions and the corresponding tax effect of those
items. We also exclude, when applicable, non-recurring changes of
non-cash valuation allowance on deferred tax assets, as well as,
non-recurring significant tax charges or benefits that relate to prior
periods which we do not believe are reflective of ongoing business and
operating results. These non-GAAP adjustments either do not reflect
actual cash outlays that impact our liquidity and our financial
condition or have a non-recurring impact on the statement of operations,
as assessed by management. These non-GAAP financial measures are
presented to permit investors to more fully understand how management
assesses our performance for internal planning and forecasting purposes.
The limitations of using these non-GAAP financial measures as
performance measures are that they provide a view of our results of
operations without including all items indicated above during a period,
which may not provide a comparable view of our performance to other
companies in our industry. Investors and other readers should consider
non-GAAP measures only as supplements to, not as substitutes for or as
superior measures to, the measures of financial performance prepared in
accordance with GAAP. Reconciliation between results on a GAAP and
non-GAAP basis is provided in a table below.

Contacts

Stratasys Investor Relations
Yonah Lloyd
Vice President
– Investor Relations
[email protected]