SSYS

Stratasys, Ltd. (SSYS)

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Stratasys (SSYS)

Q3 2010 Earnings Call

October 26, 2010 08:30 am ET

Executives

Shane Glenn - Director of IR

Scott Crump - Chairman & CEO

Bob Gallagher - CFO

Analysts

Troy Jensen - Piper Jaffray

Brian Drab - William Blair

Jim Ricchiuti - Needham & Company

Ryan Thibodeaux - Maple Leaf Partners

Chad Bennett - Northland Capital Market

Andy Schopick - Nutmeg Securities

Chuck Murphy - Sidoti & Company

Jeff Evanson - Dougherty & Company

Graeme Rein - Bares Capital

Neil Chatterji - Craig-Hallum

Presentation

Operator

Good day ladies and gentlemen and welcome to the third quarter welcome to the third quarter 2010 Stratasys earnings conference call. My name is Chris and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Shane Glenn, Director of Investor Relations. Please proceed.

Shane Glenn

Thanks Chris. Good morning and welcome to the Stratasys conference call to discuss our third quarter financial results. Representing Stratasys’ executive management on the conference call today is the Chairman and CEO Stratasys, Scott Crump and, CFO Bob Gallagher.

A quick reminder, that today's conference call is being transmitted over the web and can be accessed through the Investor section of our website at www.stratasys.com or directly by accessing the link provided in our press release.

We will begin with the Safe Harbor statement. All statements herein that are not historical facts or that includes such words as expects, anticipates, projects, estimates, vision, planning, could, plan, believes, desires, intends or similar words, constitute forward-looking statements covered by the Safe Harbor protection of 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 statements regarding projected revenue and income in future quarters, the size of the 3D printing market; our objectives for the marketing and sale of our Dimension and uPrint 3D printers, and our Fortus 3D Production Systems, particularly for the use in direct digital manufacturing; our agreement with HP to expand the distribution and sales of our 3D printers, our WaveWash support removal system, the demand for our proprietary consumables; the expansion of our paid parts service and our beliefs with respect to the growth and demand for our products.

Other risks and uncertainties that may affect our business include 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, produce and market new materials such as ULTEM and the market acceptance of these and other materials; the impact of competitive products and pricing; our timely development of new products and materials, and market acceptance of those products and materials; the success of our recent R&D initiative to expand the DDM capabilities of our core FDM technology and the success of our RedEye on demand and other paid parts services.

Our actual results may differ from those expressed or implied in our forward-looking statements. These statements represent beliefs and expectations only as of the date they were made. We may elect to update forward-looking statements, but we expressly disclaim any obligations to do so even if our beliefs and expectations change.

In addition to the statements described above, such forward-looking statements include the risks and uncertainties described more fully in our reports filed or to be filed with the Securities and Exchange Commission, including our annual reports on form 10-K and quarterly reports on Form 10-Q.

The information discussed within this conference call includes financial results that are in accordance with US Generally Accepted Accounting Principles or GAAP. In addition, non-GAAP financial measures are included that exclude certain expenses. The non-GAAP financial measures are provided in an effort to give information that the investors may deem relevant to the company’s operations and comparative performance, primarily the identification and exclusion of expenses associated with impairment charges, restructuring expenses and expenses associated with stock based compensation. The company uses these non-GAAP financial measures for evaluating comparable financial performance against prior periods. The appropriate reconciliations between non-GAAP and GAAP financial measures are provided in a table at the end of our press release.

Now I’d like to turn the call over to our CEO, Scott Crump.

Scott Crump

Good morning and thank you for joining us to discuss our third quarter financial results. The third quarter results of $30 million and $0.15 per share in GAAP EPS reflects the improvement in business conditions, we continue to observe within our core markets.

Considering the seasonal weakness that is typical during the summer months, the strong third quarter also indicates a continued building of positive momentum. Sales growth of our system area was very, very impressive with 3D printer systems revenue increasing by 26% and Fortus system revenue growing by 39% during the third quarter over last year.

Our game changing collaboration with HP continued to generate positive results during the period. Orders for their new Designjet 3D printer were strong and end-customer demand continued to build. Unit sales of our Designjet in markets served by HP were more than double than comparative uPrint sales generated within those markets last year, an impressive achievement. We remain pleased with the progress of our distribution agreement with HP and are optimistic about expanding the collaboration in the future.

Our consumable revenue grew by 34% during the third quarter, the fastest quarterly growth rate within the past three years. We believe this positive momentum can be sustained given the usage trends that we are observing within the channel. In addition, strong unit system growth which grew by 39% during the third quarter bodes well for future growth and consumable sales.

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