Stratasys Conference Call Highlights

Stratasys, Ltd. SSYS reported its first quarter earnings on Wednesday. Shares of the company are down 1 percent.

Below are some key highlights from its conference call.

• Which include strong top line revenue growth, including an impressive organic revenue growth of 35%.
• We continue to observe positive sales momentum from a broad range of products and applications.
• This includes a significant expansion in manufacturing application, as well as another impressive contribution from MakerBot.
• In addition, the strong demand we continue to observe for our high-performance systems and materials, is contributing for a favorable product mix which is having a positive impact on our margins.
• We believe our third quarter performance provides additional validation for the rationale behind our strategic initiatives and acquisitions.
• During the third quarter, we closed on the acquisition of Solid Concepts, Harvest Technologies, GrabCAD, and HAFNER.
• We believe this acquisition will expand our ability to address a wider spectrum of market verticals, application, and technology solutions.
• Total revenue for the third quarter increased by 62% over last year to $203.6 million.
• We generated impressive year-over-year organic revenue growth of 35% driven by strong demand for our products and services.
• MakerBot branded product and services revenue was also impressive increasing by over 80%.
• Our gross margin came in at a strong 58.4% for the quarter impressive when you consider the lower gross margin contribution of recent acquisitions.
• Non-GAAP net income for the third quarter increased by 50% over last year to $30.1 million, or $0.58 per diluted share.
• Product revenue in the third quarter increased by 48% to $160.2 million as compared to $108.3 million for the same period last year.
• Within product revenue, system revenue increased by 59% in the third quarter over the same period last year, driven in large part by MakerBot's impressive contribution to the quarter.
• Note that MakerBot became an organic revenue source, as of August 15, midway through the period.
• System revenue growth excluding the non-organic portion of MakerBot was also impressive, growing about 41% over last year.
• We continue to observe strong growth across a wide range of products driven by ongoing adoption of 3D printing technology for a broad range of applications from prototype to direct digital manufacturing.
• Strong sales of high-end Polyjet systems including our new line of Objet500 Connex Multi-Material 3D printers as well as the Objet1000.
• In addition, we are encouraged by the strong demand for our fifth generation MakerBot products.
• Within product revenue, consumable revenue increased by 32% in the third quarter compared to the same period last year, or 28% when excluding the non-organic portion of MakerBot.
• The growth in consumables is driven primarily by our growing installed base of 3D printers and the relatively high usage demands of our high end systems.
• In addition, we are observing favorable results from our efforts to provide applications training and material education to our customers.
• These efforts are driving utilization towards advanced higher margin materials.
• Combined with our growing installed base and specifically the installed base of the production series and high end design series systems.
• Service revenue in the first quarter increased by 145% to $33.4 million as compared to $17.7 million for the same period last year.
• This included a 38% organic increase in service revenue.
• We shipped 10,965 3D printers and additive manufacturing systems in the third quarter as compared to 5,925 systems shipped in the third quarter last year.
• This significant increase in units shipment resulted primarily from the inclusion of MakerBot Systems.
• However, we also observed stronger unit sales growth across our reported trends here in the third quarter including our high-end Fortus and Polyjet systems.
• Including all systems sold by Stratasys, Objet, Solidscape and MakerBot since their respective inceptions, the company has now sold 110,494 units worldwide on a combined basis as of the end of the third quarter.
• This is a significant milestone for the company as we believe Stratasys is the only company to have shipped over 100,000 systems on a combined basis.
• Gross margin was 58.4% for the third quarter compared to 58.8% for the same period last year.
• Sales of the company's higher margin products offset the impact of relatively lower gross margin currently generated by MakerBot and the lower gross margin.

Financial Metrics:

• The recent acquisition of GrabCAD, which was closed in September, currently provides no incremental revenue and includes an ongoing development costs that are expected to negatively impact the fourth quarter by $0.03 to $0.05 per share.
• Revenue guidance remains at $750 million to $770 million.
• Reflecting the recent acquisition of GrabCAD.
• Non-GAAP net income guidance was adjusted to $115 million to $120 million or $2.21 to $2.31 per diluted share versus our previous guidance of $117 million to $122 million or $2.25 to $2.35 per diluted share.
• GAAP guidance was updated to a net loss of $31.6 million to $24.4 million or a loss of $0.63 to $0.49 per basic share.