Stratasys Ltd. (NASDAQ:SSYS) Q1 2025 Earnings Call Transcript

Stratasys Ltd. (NASDAQ: SSYS ) Q1 2025 Earnings Call Transcript May 8, 2025

Stratasys Ltd. beats earnings expectations. Reported EPS is $0.04, expectations were $0.03.

Operator: Greetings, and welcome to the Stratasys Q1 2025 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Yonah Lloyd, Chief Communications Officer and VP of Investor Relations. Thank you. You may begin.

Yonah Lloyd: Good morning, everyone, and thank you for joining us to discuss our 2025 first quarter financial results. On the call with us today are our CEO, Dr. Yoav Zeif, and our CFO, Eitan Zamir. I would like to remind you that access to today's call, including the slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will also be available and can be accessed through the Investor Relations section of our website. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements, including without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes and other future financial performance and our expectations for our business outlook.

All statements that speak to future performance, events, expectations or results are forward-looking statements. Actual results or trends could differ materially from our forecast. For risks that could cause actual results to be materially different from those set forth in forward-looking statements, please refer to the risk factors discussed or referenced in Stratasys' annual reports on Form 20-F for the 2024 year. Please also refer to that annual report along with our reports filed with or furnished to the SEC throughout 2025 for additional operational and financial details. Reports on Form 6-K that we are furnished to the SEC on a quarterly basis and throughout the year provide updated current information regarding the company's operating results and material developments concerning our company.

Stratasys assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Non-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif. Yoav?

Yoav Zeif: Thank you, Yonah. Good morning, everyone, and thank you for joining us. Our solid first quarter performance continues to demonstrate the resilience of our recurring revenue model and the high utilization rates across our customer base. Our results reinforce our confidence in expanded implementation for years to come. The robust demand for consumables, which grew 7% sequentially, underscores the enduring value placed in Stratasys additive manufacturing systems. Our strategic positioning remains excellent as we continue benefiting from our ongoing investments in R&D that support the introduction of innovative products, materials and software solutions to several customers and enhance our presence as a digital manufacturing leader.

Our long-term value creation strategy focuses on high growth end users driven by powerful megatrends. These include supply chain improvement through onshoring, next generation mobility, sustainability initiatives and the continuous pursuit of manufacturing efficiency and cost reduction through a disciplined market focused approach centered around the most compelling use cases while paying close attention to our margin profile, we have established the foundation for Stratasys profitable growth. We have drive our strategy early in the second quarter, we closed on Fortissimo Capital’s $120 million strategic investment in the company, bringing our cash and equivalents to approximately $270 million with no debt. This significant transaction brought Yuval Cohen, Fortissimo Founding and Managing Partner with over three decades of financial experience to our Board of Directors.

His innovative approach has created tremendous value for his firm and the companies in which they have invested and we look forward to Yuval’s contribution to our Board. Before diving into the quarter, let me touch on how we are thinking about the ongoing tariff situation. Last quarter, we shared that from our perspective, we are relatively exempt from this issue. Most of our printers and materials are produced in The US. or in Israel. We are monitoring the new cycle closely. And at this time, we continue to expect no material revenue impact. In terms of our costs, we are reviewing various mitigation scenarios that can be quickly deployed if needed. As a reminder, additive manufacturing is ideally suited as a solution for high tariff environment as it promotes manufacturing locally, quickly and cost effectively.

Tariffs can actually serve as a long-term positive business catalyst and we look forward to increased activity with our customers as we demonstrate these benefits. Turning to new technology offerings and customer success beginning with hardware. We launched the Neo800 plus an advanced stereolithography 3D printer that builds on the success of the Neo800 with significant performance enhancements for industries that benefit from large accurate high-fidelity parts. The new model incorporates technology that boosts printing speed by up to 50% while maintaining precision. Enhanced reliability features and real time environmental monitoring maximize uptime and consistency at faster scan speeds without compromising quality together with our GrabCAD print build preparation software, complementary post processing solutions and a new improved portfolio of materials, the Neo800 plus provides a complete SLA ecosystem that streamlines production workflows for applications in automotive, aerospace, wind tunnel testing, prototyping and tooling.

We launched this exciting new technology alongside Rivian Automotive, an end core customer at the Rapid Trade Show in April. In aerospace, a recent and exciting example of manufacturing flight rate parts is BOOM Supersonic, where our FDM portfolio is helping to build the next generation of supersonic commercial jets. Their XB-1 jet broke the sound barrier during the first quarter and we were proud that over three fifty end use parts on the aircraft were made using our system. Our FDM also printed over 750 drill guides for use during aircraft assembly as well as the Starlink mount on the chase plane to support live streaming of the event. As an example of how additive manufacturing has a clear economic advantage, the flight controlled test ring tooling for the XB-1 resulted in a 90% saving on cost and lead time as compared to conventionally produced alternatives.

And we are proud to mark the 10 anniversary of our Fortus 450mc with the launch of the Gen 3 model, an upgraded factory-floor-ready solution designed for high-strength tooling and production applications with 92% of units installed over the past decade still in use, the Fortus 450mc and its reputation as a reliable FDM workhorse. The new Gen 3 builds on that legacy with bundled hardened components for advanced materials like Nylon 12CF, a license for full access to the Fortus 450mc material portfolio and an enhanced processing capabilities with included GrabCAD Print Pro for great precision and productivity. Additional upgrades in the coming months include support for glass-filled, fire-resistant materials and features to enable faster build time, expanding the systems application range for jigs, fixtures and other factory-ready parts.

The Fortus 450mc Gen 3 reinforces Stratasys' commitment to delivering reliable, connected solutions that help manufacturers boost output, reduce costs and streamline operations. On the material side, we reached another significant milestone in our effort to scale and accelerate adoption of qualified additive manufacturing with the launch of two new validated Antero materials for the Stratasys F900. These were developed through rigorous qualification collaboration with industry leaders, including Northrop Grumman, Boeing and BAE Systems and several defense organizations, including U.S. Navy and Air Force. The advanced industrial solution materials meet stringent requirements for mission-critical applications in aerospace, defense and other high regulated industries.

The materials offer exceptional resistance to extreme temperatures and harsh chemicals, enabling manufacturers to confidently adopt 3D printing with proven reliability, reduced qualification costs and consistent performance across production sites, empowering faster innovation and deployment of additive manufacturing for qualified end-use applications throughout enterprise operations. We also introduced PolyJet ToughONE, an advanced material that addresses a key point of feedback from our customers, providing PolyJet with functional prototyping capabilities to expand the amount of use cases. The material combines exceptional design precision with functional strength for our high-end platforms, enabling engineers and designers to create prototypes and end-use parts without compromising between aesthetics and durability.

ToughONE allows engineers to move from concept to functional testing faster while maintaining precision and performance and it integrates seamlessly with other PolyJet materials to enable hybrid models that combine different mechanical properties or colors within a single part. Now, over to Eitan to review our financials. Eitan?

Eitan Zamir: Thank you, Yoav, and good morning, everyone. This quarter demonstrated the continued resilience of our operating model, a key differentiator relative to competitors in our sector as well as the fast actions of our team as we delivered significant OpEx savings and bottom-line profit despite pressure on revenues. These solid results were thanks in part to a quarter of sequential growth in consumable sales and full run rate contributions from the cost control initiatives we began in the middle of last year. Now let me get into the details of our numbers. For the first quarter, consolidated revenue was $136 million compared to $144.1 million in the same quarter in 2024 as customers continue to defer major capital spending until market uncertainty subsides.

Product revenue in the first quarter was $93.8 million compared to $99.2 million in the same period last year. Service revenue was $42.2 million compared to $44.9 million in the same period last year. Within products revenue, system revenue was $31.2 million compared to the $32.9 million we produced in the same period last year. Consumables revenue was $62.6 million compared to $66.3 million in the same period last year. Note that on a sequential quarterly basis, consumables revenue was up approximately 7%. Utilization rates of the system we have sold remained strong, and we expect consumables revenue to grow on a full year-over-year basis in 2025 relative to 2024. Within service revenue, customer support revenue was $30 million compared to $31.4 million in the same period last year.

Now turning to gross margin. GAAP gross margin was 44.3% for the quarter compared to 44.4% for the same period last year. Non-GAAP gross margin was 48.3% for the quarter compared to 48.6% in the same period last year. The modest decline versus the prior year period was driven in part by the lower revenue. GAAP operating expenses were $72.6 million, 53.4% of revenue compared to $88.4 million or 61.3% of revenue during the same period last year. The reduction in expenses was due to our cost savings initiatives and by not having the expenses associated with the strategic review process that we conducted in 2024, among other items. Non-GAAP operating expenses were $62.6 million, 46% of revenue compared to $71.2 million or 49.4% of revenue during the same period last year, due primarily to lower employee-related costs, including benefits from the cost-saving initiatives announced later on last year.

Regarding our consolidated earnings. GAAP operating loss for the quarter was $12.4 million compared to a loss of $24.5 million for the same period last year. Non-GAAP operating income for the quarter was $3 million compared to an operating loss of $1.2 million for the same period last year, reflecting the impact of reduced operating expenses due to our cost-cutting efforts. GAAP net loss for the quarter was $13.1 million or $0.18 per diluted share compared to a net loss of $26 million or $0.37 per diluted share for the same period last year. Non-GAAP net income for the quarter was $2.9 million or $0.04 per diluted share compared to a net loss of $1.7 million or $0.02 per diluted share in the same period last year. Adjusted EBITDA was $8.2 million for the quarter compared to $4.1 million in the same period last year.

From a cash flow perspective, we generated $4.5 million in cash from operating activities compared to $7.3 million in the same period last year. We ended the quarter with $150.1 million in cash, cash equivalents and short-term deposits, relatively flat as compared to year-end 2024. Our balance sheet remains strong, currently at $270 million and no debt after being bolstered by the $120 million in cash contributed by Fortissimo investment in Stratasys in early April, strengthening our ability to act on value-enhancing opportunities. Now let me turn to our outlook for 2025. We are reiterating our expectation that full year 2025 revenues will range between $570 million to $585 million, with revenues growing sequentially through the year. We are also reaffirming non-GAAP gross margin, operating expenses, operating margins and adjusted EBITDA and capital expenditures.

And we expect to see year-over-year growth in both operating and free cash flow. Please refer to the press release for additional details. We are raising our earnings per share outlook. As a result of the Fortissimo investment, our share count as of April 8 went up by approximately 11.65 million shares. Our outlook assumes the Fortissimo investment will generate interest income throughout the entire year of 2025, and that this interest income will more than offset the dilution to our earnings from the higher share count. As a result, we are raising our earnings forecast as follows. We now expect GAAP net loss to be in a range of minus $64 million to minus $49 million, an improvement as compared to the previous range of minus $68 million to minus $53 million.

We also now expect GAAP EPS to improve to a range of minus $0.80 to minus $0.61 per diluted share as compared to the previous range of minus $0.93 to minus $0.72. We are also increasing our non-GAAP net income guidance to a new range of $24 million to $30 million as compared to the previous range of $20 million to $26 million and EPS to a range of $0.30 to $0.37 per diluted share as compared to the previous range of $0.28 to $0.35 per diluted share. With that, let me turn the call back over to Yoav for closing remarks. Yoav?

Yoav Zeif: Thank you, Eitan. Our start to 2025 establishes a solid foundation for the year ahead. Stratasys is exceptionally well positioned, thanks to our strategic cost management initiatives, continuous product innovation and growing integration into our customers' manufacturing workflow. Our strong financial position, bolstered by the Fortissimo investment expands our capability to pursue both organic growth opportunities and strategic acquisitions that align with our vision for accretive expansion. We have refined our strategic focus to target the most promising applications while enhancing our customer engagement approach through improved go-to-market strategies and comprehensive user education programs. Our unwavering commitment to increasing profitability while maintaining financial discipline ensures we are optimizing for both near-term performance and long-term value creation.

With our strong portfolio across systems, consumable and software, Stratasys is ideally positioned to capitalize on market momentum when capital investment cycle accelerates. With that, let's open it up for questions. Operator?

To continue reading the Q&A session, please click here .