Stratasys Ltd. announced financial results for the second quarter of 2016.

Q2-2016 Financial Results Summary:

• Revenue for the second quarter of 2016 was $172.1 million.
• GAAP gross margins were 46.2% for the second quarter, compared to 45.5% for the same period last year.
• Non-GAAP gross margins were 55.9% for the second quarter, compared to 54.7% for the same period last year.
• GAAP operating loss for the second quarter was $17.1 million, compared to a loss of $33.5 million for the same period last year.
• Non-GAAP operating income for the second quarter was $10.2 million, compared to $3.7 million for the same period last year.
• GAAP net loss for the second quarter was $18.5 million, or ($0.36) per diluted share, compared to a loss of $22.9 million, or ($0.55) per diluted share, for the same period last year.
• Non-GAAP net income for the second quarter was $6.2 million, or $0.12 per diluted share, compared to non-GAAP net income of $8 million, or $0.15 per diluted share, reported for the same period last year.
• The Company generated $6.9 million in cash from operations during the second quarter, and currently holds approximately $253.9 million in cash and cash equivalents.
• GAAP R&D expenses for the second quarter amounted to $24.4 million, representing 14% of net sales.
• GAAP EBITDA for the second quarter amounted to $6.9 million.
• Non-GAAP EBITDA for the second quarter amounted to $19.5 million.

"We were pleased to achieve further improvements in our operational performance during the second quarter," said Ilan Levin, Chief Executive Officer of Stratasys. "Compared to the first quarter, we observed stronger margins and a substantial increase in non-GAAP operating profit. Our margins benefitted from a sales mix that favored our higher-end systems, including the recently launched J750, the industry's most advanced full-color, multi-material 3D printer, as well as our ongoing efforts to improve operations, and reduce operating expenses."

Recent Business Highlights:

• Announced the appointment of Ilan Levin, who has served and continues to serve as a member of the Stratasys board of directors and its Executive Committee, as Chief Executive Officer, effective July 1, 2016.
• Announced the availability of GrabCAD Print, a new "design-to-print" workflow application powered by the GrabCAD software platform, designed to make 3D printing significantly easier, more intuitive and highly accessible. GrabCAD Print is currently available in free public beta in North America.
• Released several manufacturing-focused enhancements for the Company's Fortus series of FDM 3D printers, including new sacrificial tooling capabilities; an acceleration kit for faster printing of large objects; and new aerospace designation for ULTEM 9085 that provides production traceability to facilitate aerospace compliance requirements.
• Announced a professional services and consulting offering through Stratasys Direct Manufacturing to help organizations implement and gain maximum value from a full spectrum of 3D printing technology solutions.

"We believe that our technological platforms and customer reach are unmatched within the industry and represent assets with significant potential for further development," continued Levin. "The central principle of our strategy is meeting the needs of customers by further leveraging our core assets to cultivate new and more advanced capabilities for prototyping and manufacturing applications within key vertical markets. Providing enhanced additive manufacturing value to our customers is our number one priority."

Financial Guidance:

Stratasys reiterated the following information regarding the Company's prospective revenue and net income (loss) for the fiscal year ending December 31, 2016:

• Revenue guidance of $700 to $730 million.
• GAAP net loss of $84.0 to $67.0 million, or ($1.60) to ($1.28) per diluted share.
• Non-GAAP net income of $9 to $23 million, or $0.17 to $0.43 per diluted share.

Stratasys provided the following additional information regarding the Company's prospective performance and strategic plans for fiscal 2016:

• Gross margins in a range of 54% to 55%.
• Operating margins of 3% to 5%.
• Tax expense of $15 to $17 million, which includes the negative impact of the planned accounting treatment for tax valuation allowance.
• Capital expenditures are projected at $60 to $70 million, with approximately $45 million designated for completing the company's new facility in Israel.

The Company is seeking an improvement in its operating structure in 2016 that will translate into improved operating profit compared to the prior year. Given the expected ongoing negative impact of not recording a tax benefit on U.S. tax losses on the Company non-GAAP net income, the Company believes that the rate of growth in its non-GAAP operating profit will be the best measure of performance.

"Over the past four years, since the merger of Stratasys and Objet, our company has undergone a major transformation, driven by initiatives that we believe are essential to our long-term success. Enhancing the value of additive manufacturing for our customers will require significant investments in time and other resources to fully develop. Operational efficiency and improved financial performance will remain a priority as we continue to execute our strategy. As CEO of Stratasys, I am excited about our future and I look forward to the challenge of building on our company's legacy as the industry leader in additive manufacturing," Levin concluded.

Non-GAAP earnings guidance excludes $59.0 million of projected amortization of intangible assets; $25.0 to $27.0 million of share-based compensation expense; $7.0 million in merger and acquisition related expense; $4.0 to $5.0 million in reorganization and other related costs; and includes $5.0 million in tax expenses related to non-GAAP adjustments.

Stratasys Ltd.
Consolidated Balance Sheets
(in thousands, except share data)
		June 30,				December 31,
		2016				2015
		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	253,882			$	257,592
Short-term bank deposits			-				571
Accounts receivable, net			113,327				123,215
Inventories			125,686				123,658
Net investment in sales-type leases			12,269				11,704
Prepaid expenses			7,177				8,469
Other current assets			21,465				21,864
Total current assets			533,806				547,073
Non-current assets
Goodwill			386,313				383,853
Other intangible assets, net			222,324				252,468
Property, plant and equipment, net			209,299				201,934
Net investment in sales-type leases - long term			16,733				17,785
Deferred income taxes and other non-current assets			31,102				11,243
Total non-current assets			865,771				867,283
Total assets		$	1,399,577			$	1,414,356
LIABILITIES AND EQUITY
Current liabilities
Accounts payable		$	42,866			$	39,021
Accrued expenses and other current liabilities			31,599				31,314
Accrued compensation and related benefits			38,646				34,052
Income taxes payable			4,616				11,395
Obligations in connection with acquisitions			4,781				4,636
Deferred revenues			51,974				52,309
Total current liabilities			174,482				172,727
Non-current liabilities
Obligations in connection with acquisitions - long term			4,349				4,354
Deferred tax liabilities			11,910				16,040
Deferred revenues - long-term			10,635				7,627
Other non-current liabilities			36,747				22,428
Total non-current liabilities			63,641				50,449
Total liabilities			238,123				223,176
Redeemable non-controlling interests			2,193				2,379
Equity
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 thousands shares; 52,218 thousands shares and 52,082 thousands shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively			141				141
Additional paid-in capital			2,617,284				2,605,957
Accumulated deficit			(1,448,337	)			(1,406,706	)
Accumulated other comprehensive loss			(10,003	)			(10,774	)
Equity attributable to Stratasys Ltd.			1,159,085				1,188,618
Non-controlling interest			176				183
Total equity			1,159,261				1,188,801
Total liabilities and equity		$	1,399,577			$	1,414,356

Stratasys Ltd.
Consolidated Statements of Operations
(in thousands, except per share data)
		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Net sales
Products		$	123,758			$	134,490			$	242,392			$	261,157
Services			48,315				47,832				97,587				93,896
			172,073				182,322				339,979				355,053
Cost of sales
Products			61,413				67,666				118,351				166,037
Services			31,128				31,748				60,927				60,020
			92,541				99,414				179,278				226,057
Gross profit			79,532				82,908				160,701				128,996
Operating expenses
Research and development, net			24,366				25,506				49,481				52,744
Selling, general and administrative			72,884				97,581				149,271				200,189
Goodwill impairment			-				-				-				150,400
Change in the fair value of obligations in connection with acquisitions			(587	)			(6,680	)			140				(19,936	)
			96,663				116,407				198,892				383,397
Operating loss			(17,131	)			(33,499	)			(38,191	)			(254,401	)
Financial income (expenses), net			932				(711	)			1,112				(5,835	)
Loss before income taxes			(16,199	)			(34,210	)			(37,079	)			(260,236	)
Income taxes			2,454				(11,066	)			4,745				(20,688	)
Net loss			(18,653	)			(23,144	)			(41,824	)			(239,548	)
Net loss attributable to non-controlling interest			(163	)			(213	)			(193	)			(329	)
Net loss attributable to Stratasys Ltd.		$	(18,490	)		$	(22,931	)		$	(41,631	)		$	(239,219	)
Net loss per ordinary share attributable to Stratasys Ltd.
Basic		$	(0.35	)		$	(0.48	)		$	(0.80	)		$	(4.71	)
Diluted			(0.36	)			(0.55	)			(0.80	)			(4.77	)
Weighted average ordinary shares outstanding
Basic			52,169				51,405				52,133				51,181
Diluted			52,496				51,870				52,133				51,413

Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Results of Operations
(in thousands)
				Three Months Ended June 30,
				2016				Non-GAAP				2016				2015				Non-GAAP				2015
				GAAP				Adjustments				Non-GAAP				GAAP				Adjustments				Non-GAAP
				U.S. dollars and shares in thousands (except per share amounts)
		Gross profit (1)		$	79,532			$	16,715			$	96,247			$	82,908			$	16,816			$	99,724
		Operating income (loss) (1,2)			(17,131	)			27,332				10,201				(33,499	)			37,172				3,673
		Net income (loss) attributable to Stratasys Ltd. (1,2,3)			(18,490	)			24,728				6,238				(22,931	)			30,893				7,962
		Net income (loss) per diluted share attributable to Stratasys Ltd. (4)		$	(0.36	)		$	0.48			$	0.12			$	(0.55	)		$	0.70			$	0.15
(1)		Acquired intangible assets amortization expense							10,510												12,301
		Impairment charges of other intangible assets							1,779												-
		Non-cash stock-based compensation expense							729												1,797
		Reorganization and other related costs							3,543												2,512
		Merger and acquisition and other expense							154												206
									16,715												16,816
(2)		Acquired intangible assets amortization expense							3,621												5,684
		Non-cash stock-based compensation expense							4,750												7,767
		Change in fair value of obligations in connection with acquisitions							(587	)											(6,680	)
		Reorganization and other related costs							956												6,755
		Merger and acquisition and other expense							1,877												6,830
									10,617												20,356
									27,332												37,172
(3)		Corresponding tax effect and other tax adjustments							(2,604	)											(6,279	)
								$	24,728											$	30,893
(4)		Weighted average number of ordinary shares outstanding- Diluted			52,496								53,238				51,870								52,705

Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Results of Operations
(in thousands)
				Six Months Ended June 30,
				2016				Non-GAAP				2016				2015				Non-GAAP				2015
				GAAP				Adjustments				Non-GAAP				GAAP				Adjustments				Non-GAAP
				U.S. dollars and shares in thousands (except per share amounts)
		Gross profit (1)		$	160,701			$	27,993				188,694			$	128,996			$	64,137			$	193,133
		Operating income (loss) (1,2)			(38,191	)			52,345				14,154				(254,401	)			257,298				2,897
		Net income (loss) attributable to Stratasys Ltd. (1,2,3)			(41,631	)			48,465				6,834				(239,219	)			249,205				9,986
		Net income (loss) per diluted share attributable to Stratasys Ltd. (4)		$	(0.80	)		$	0.93			$	0.13				(4.77	)			4.96				0.19
(1)		Acquired intangible assets amortization expense							20,924												27,206
		Impairment of other intangible assets							1,779												29,782
		Non-cash stock-based compensation expense							1,452												3,630
		Reorganization and other related costs							3,321												2,512
		Merger and acquisition and other expense							517												1,007
									27,993												64,137
(2)		Goodwill impairment							-												150,400
		Impairment of other intangible assets							-												13,423
		Acquired intangible assets amortization expense							7,382												12,140
		Non-cash stock-based compensation expense							9,650												15,694
		Change in fair value of obligations in connection with acquisitions							140												(19,936	)
		Reorganization and other related costs							1,461												6,756
		Merger and acquisition and other expense							5,719												14,684
									24,352												193,161
									52,345												257,298
(3)		Corresponding tax effect and other tax adjustments							(3,880	)											(8,093	)
								$	48,465											$	249,205
(4)		Weighted average number of ordinary shares outstanding- Diluted			52,133								53,201				51,413								52,524

Stratasys Ltd.
Reconciliation of GAAP to Non-GAAP Forward Looking Guidance
Fiscal Year 2016
(in millions, except per share data)
GAAP net loss		($84) to ($67)
Adjustments
Stock-based compensation expense		$25 to $27
Intangible assets amortization expense		$59
Merger and acquisition related expense		$7
Reorganization and other related costs		$4 to $5
Tax expense related to Non-GAAP adjustments		($5)
Non-GAAP net income		$9 to $23
GAAP loss per share		($1.60) to ($1.28)
Non-GAAP diluted earnings per share		$0.17 to $0.43