UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2023
Commission File Number 001-35751
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STRATASYS LTD. |
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(Translation of registrant’s name into English) |
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c/o Stratasys, Inc. 9600 West 76th Street Eden Prairie, Minnesota 55344 |
1 Holtzman Street, Science Park P.O. Box 2496 Rehovot, Israel 76124 |
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(Address of principal executive office) |
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Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐
CONTENTS
On November 16, 2023, Stratasys Ltd., or Stratasys, released its financial results for the three and nine months ended September 30, 2023.
Attached hereto as Exhibit 99.1 are the unaudited, condensed consolidated financial statements of Stratasys as of, and for the three and nine months ended, September 30, 2023 (including the notes thereto), or the Q3 2023 Financial Statements
Attached hereto as Exhibit 99.2 is Stratasys’ review of its results of operations and financial condition for the three and nine months ended September 30, 2023, including the following:
(i)
Operating and Financial Review and Prospects
(ii)
Quantitative and Qualitative Disclosures About Market Risk
(iii)
Legal Proceedings
(iv)
Risk Factors
Attached hereto as Exhibit 101 are the Q3 2023 Financial Statements, formatted in IXBRL (eXtensible Business Reporting Language), consisting of the sub-exhibits listed below.
Exhibit Number |
Document Description |
99.1 |
Unaudited, condensed consolidated financial statements of Stratasys as of, and for the three and nine months ended, September 30, 2023 |
99.2 |
Stratasys' review of its results of operations and financial condition for the three and nine months ended September 30, 2023 |
EX-101.INS |
IXBRL Taxonomy Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
EX-101.SCH |
IXBRL Taxonomy Extension Schema Document |
EX-101.CAL |
IXBRL Taxonomy Calculation Linkbase Document |
EX-101.DEF |
IXBRL Taxonomy Extension Definition Linkbase Document |
EX-101.LAB |
IXBRL Taxonomy Label Linkbase Document |
EX-101.PRE |
IXBRL Taxonomy Presentation Linkbase Document |
EX-104 |
Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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STRATASYS LTD. | |
Dated: November 16, 2023 |
By: |
/s/ Eitan Zamir |
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Name: |
Eitan Zamir |
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Chief Financial Officer |
Exhibit 99.1
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2023
(UNAUDITED)
INDEX TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
(UNAUDITED)
Item |
Page | |
Consolidated Balance Sheets |
2 | |
Consolidated Statements of Operations and Comprehensive Loss |
3 | |
Consolidated Statements of Changes in Equity |
4-5 | |
Consolidated Statements of Cash Flows |
6 | |
Notes to Condensed Consolidated Interim Financial Statements |
7-21 |
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Consolidated Balance Sheets | ||||||||
(in thousands, except per share data) | ||||||||
September 30, 2023 | December 31, 2022 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 104,563 | $ | 150,470 | ||||
Short-term deposits | 80,000 | 177,367 | ||||||
Accounts receivable, net of allowance for credit losses of $1.4 million and $0.9 million as of September 30, 2023 and December 31, 2022, respectively | 164,075 | 144,739 | ||||||
Inventories | 197,420 | 194,054 | ||||||
Prepaid expenses | 9,732 | 5,767 | ||||||
Other current assets | 27,534 | 27,823 | ||||||
Total current assets | 583,324 | 700,220 | ||||||
Non-current assets | ||||||||
Property, plant and equipment, net | 198,272 | 195,063 | ||||||
Goodwill | 90,187 | 64,953 | ||||||
Other intangible assets, net | 141,201 | 121,402 | ||||||
Operating lease right-of-use assets | 19,533 | 18,122 | ||||||
Long-term investments | 129,738 | 141,610 | ||||||
Other non-current assets | 19,510 | 18,420 | ||||||
Total non-current assets | 598,441 | 559,570 | ||||||
Total assets | $ | 1,181,765 | $ | 1,259,790 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 60,845 | $ | 72,921 | ||||
Accrued expenses and other current liabilities | 49,817 | 45,912 | ||||||
Accrued compensation and related benefits | 31,502 | 34,432 | ||||||
Deferred revenues - short term | 51,751 | 50,220 | ||||||
Operating lease liabilities - short term | 6,511 | 7,169 | ||||||
Total current liabilities | 200,426 | 210,654 | ||||||
Non-current liabilities | ||||||||
Deferred revenues - long term | 28,559 | 25,214 | ||||||
Deferred income taxes - long term | 6,889 | 5,638 | ||||||
Operating lease liabilities - long term | 12,692 | 10,670 | ||||||
Contingent consideration - long term | 25,884 | 23,707 | ||||||
Other non-current liabilities | 24,172 | 24,475 | ||||||
Total non-current liabilities | 98,196 | 89,704 | ||||||
Total liabilities | $ | 298,622 | $ | 300,358 | ||||
Contingencies (see note 13) | ||||||||
Equity | ||||||||
Ordinary shares, NIS 0.01 nominal value, authorized 180,000 shares; 69,165 shares and 67,086 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 194 | 187 | ||||||
Additional paid-in capital | 3,080,877 | 3,048,915 | ||||||
Accumulated other comprehensive loss | (12,958 | ) | (12,818 | ) | ||||
Accumulated deficit | (2,184,970 | ) | (2,076,852 | ) | ||||
Total equity | 883,143 | 959,432 | ||||||
Total liabilities and equity | $ | 1,181,765 | $ | 1,259,790 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Consolidated Statements of Operations and Comprehensive Loss | ||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||
Revenues | ||||||||||||||||||
Products | $ | 113,270 | $ | 112,133 | $ | 323,353 | $ | 340,927 | ||||||||||
Services | 48,863 | 50,059 | 147,908 | 151,297 | ||||||||||||||
162,133 | 162,192 | 471,261 | 492,224 | |||||||||||||||
Cost of revenues | ||||||||||||||||||
Products | 59,546 | 55,916 | 168,235 | 176,421 | ||||||||||||||
Services | 36,938 | 35,527 | 105,760 | 107,984 | ||||||||||||||
96,484 | 91,443 | 273,995 | 284,405 | |||||||||||||||
Gross profit | 65,649 | 70,749 | 197,266 | 207,819 | ||||||||||||||
Operating expenses | ||||||||||||||||||
Research and development, net | 23,567 | 23,145 | 69,347 | 71,489 | ||||||||||||||
Selling, general and administrative | 84,880 | 63,230 | 221,173 | 195,085 | ||||||||||||||
108,447 | 86,375 | 290,520 | 266,574 | |||||||||||||||
Operating loss | (42,798 | ) | (15,626 | ) | (93,254 | ) | (58,755 | ) | ||||||||||
Gain from deconsolidation of subsidiary | 39,136 | 39,136 | ||||||||||||||||
Financial income (expenses), net | 687 | 452 | 2,147 | (2,080 | ) | |||||||||||||
Income (loss) before income taxes | (42,111 | ) | 23,962 | (91,107 | ) | (21,699 | ) | |||||||||||
Income tax expenses | (645 | ) | (3,298 | ) | (5,145 | ) | (2,796 | ) | ||||||||||
Share in losses of associated companies | (4,523 | ) | (1,915 | ) | (11,866 | ) | (2,089 | ) | ||||||||||
Net income (loss) | $ | (47,279 | ) | $ | 18,749 | $ | (108,118 | ) | $ | (26,584 | ) | |||||||
$ | (0.68 | ) | $ | 0.28 | $ | (1.58 | ) | $ | (0.40 | ) | ||||||||
Weighted average ordinary shares outstanding. - basic | 69,093 | 66,772 | 68,432 | 66,356 | ||||||||||||||
Weighted average ordinary shares outstanding. - diluted | 69,093 | 67,038 | 68,432 | 66,356 | ||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||
Net income (loss) | (47,279 | ) | 18,749 | (108,118 | ) | (26,584 | ) | |||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||
Foreign currency translation adjustments | (1,353 | ) | (1,598 | ) | 482 | (5,089 | ) | |||||||||||
Unrealized gains (losses) on derivatives designated as cash flow hedges | 1,066 | 729 | (622 | ) | (363 | ) | ||||||||||||
Other comprehensive loss, net of tax | (287 | ) | (869 | ) | (140 | ) | (5,452 | ) | ||||||||||
Comprehensive income (loss) | $ | (47,566 | ) | $ | 17,880 | $ | (108,258 | ) | $ | (32,036 | ) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Consolidated Statements of Changes in Equity | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Three and Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Ordinary Shares | Paid-In | Accumulated | Comprehensive | Total | ||||||||||||||||||||
Number of shares | Par Value | Capital | deficit | Loss | Equity | |||||||||||||||||||
Balance as of December 31, 2022 | 67,086 | $ | 187 | $ | 3,048,915 | $ | (2,076,852 | ) | $ | (12,818 | ) | $ | 959,432 | |||||||||||
Issuance of shares in connection with stock-based compensation plans | 1,017 | 3 | 1 | 4 | ||||||||||||||||||||
Stock-based compensation | - | 8,241 | 8,241 | |||||||||||||||||||||
Comprehensive loss | - | (22,224 | ) | (990 | ) | (23,214 | ) | |||||||||||||||||
Balance as of March 31, 2023 | 68,103 | $ | 190 | $ | 3,057,157 | $ | (2,099,076 | ) | $ | (13,808 | ) | $ | 944,463 | |||||||||||
Issuance of shares in connection with stock-based compensation plans | 268 | 1 | 4 | 5 | ||||||||||||||||||||
Stock-based compensation | - | 8,022 | 8,022 | |||||||||||||||||||||
Comprehensive income (loss) | - | (38,615 | ) | 1,137 | (37,478 | ) | ||||||||||||||||||
Issuance of Common stock under employee stock purchase plan | 253 | 1 | 3,013 | - | - | 3,014 | ||||||||||||||||||
Issuance of shares as part of the Covestro acquisition | 318 | 1 | 5,200 | - | - | 5,201 | ||||||||||||||||||
Balance as of June 30, 2023 | 68,942 | $ | 193 | $ | 3,073,396 | $ | (2,137,691 | ) | $ | (12,671 | ) | $ | 923,227 | |||||||||||
Issuance of shares in connection with stock-based compensation plans | 223 | 1 | 1 | |||||||||||||||||||||
Stock-based compensation | - | 7,481 | 7,481 | |||||||||||||||||||||
Comprehensive loss | - | (47,279 | ) | (287 | ) | (47,566 | ) | |||||||||||||||||
Balance as of September 30, 2023 | 69,165 | $ | 194 | $ | 3,080,877 | $ | (2,184,970 | ) | $ | (12,958 | ) | $ | 883,143 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Consolidated Statements of Changes in Equity | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Three and Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Ordinary Shares | Paid-In | Accumulated | Comprehensive | Total | ||||||||||||||||||||
Number of shares | Par Value | Capital | deficit | Loss | Equity | |||||||||||||||||||
Balance as of December 31, 2021 | 65,677 | $ | 182 | $ | 3,012,481 | $ | (2,047,878 | ) | $ | (8,771 | ) | $ | 956,014 | |||||||||||
Issuance of shares in connection with stock-based compensation plans | 731 | 3 | 152 | 155 | ||||||||||||||||||||
Stock-based compensation | - | 8,533 | 8,533 | |||||||||||||||||||||
Comprehensive loss | - | (20,948 | ) | (1,053 | ) | (22,001 | ) | |||||||||||||||||
Balance as of March 31, 2022 | 66,408 | 185 | 3,021,166 | (2,068,826 | ) | (9,824 | ) | 942,701 | ||||||||||||||||
Issuance of shares in connection with stock-based compensation plans | 336 | 1 | 91 | 92 | ||||||||||||||||||||
Stock-based compensation | - | $ | $ | 8,831 | $ | $ | $ | 8,831 | ||||||||||||||||
Comprehensive loss | - | (24,385 | ) | (3,530 | ) | (27,915 | ) | |||||||||||||||||
Balance as of June 30, 2022 | 66,744 | 186 | 3,030,088 | (2,093,211 | ) | (13,354 | ) | 923,709 | ||||||||||||||||
Issuance of shares in connection with stock-based compensation plans | 40 | 13 | 13 | |||||||||||||||||||||
Stock-based compensation | - | 7,391 | 7,391 | |||||||||||||||||||||
Other items | - | (267 | ) | (267 | ) | |||||||||||||||||||
Comprehensive income (loss) | - | 18,749 | (869 | ) | 17,880 | |||||||||||||||||||
Balance as of September 30, 2022 | 66,784 | $ | 186 | $ | 3,037,225 | $ | (2,074,462 | ) | $ | (14,223 | ) | $ | 948,726 |
STRATASYS LTD.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Consolidated Statements of Cash Flows | |||||||||
(in thousands) | Nine Months Ended September 30, | ||||||||
2023 | 2022 | ||||||||
Cash flows from operating activities | |||||||||
Net loss | $ | (108,118 | ) | $ | (26,584 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
Impairment of other long-lived assets | 4,471 | 3,865 | |||||||
Depreciation and amortization | 37,198 | 44,451 | |||||||
Stock-based compensation | 23,744 | 24,755 | |||||||
Foreign currency transaction loss | 4,087 | 13,978 | |||||||
Gain from deconsolidation of subsidiary | (39,136 | ) | |||||||
Share in losses of associated companies | 11,866 | 2,089 | |||||||
Revaluation of investments | 5,681 | 3,217 | |||||||
Other non-cash items, net | 2,494 | 826 | |||||||
Change in cash attributable to changes in operating assets and liabilities: | |||||||||
Accounts receivable, net | (19,676 | ) | (21,832 | ) | |||||
Inventories | (752 | ) | (64,286 | ) | |||||
Other current assets and prepaid expenses | (3,512 | ) | 3,898 | ||||||
Other non-current assets | 4,198 | (17,003 | ) | ||||||
Accounts payable | (13,031 | ) | 17,286 | ||||||
Other current liabilities | (2,967 | ) | 2,013 | ||||||
Deferred revenues | 5,123 | 4,860 | |||||||
Deferred income taxes, net and uncertain tax positions | 2,891 | (301 | ) | ||||||
Other non-current liabilities | (7,609 | ) | (9,385 | ) | |||||
Net cash used in operating activities | (53,912 | ) | (57,289 | ) | |||||
Cash flows from investing activities | |||||||||
Cash paid for acquisitions, net of cash acquired | (68,360 | ) | |||||||
Purchase of property and equipment | (8,816 | ) | (11,761 | ) | |||||
Investments in short-term bank deposits | (31,448 | ) | (307,485 | ) | |||||
Proceeds from short-term bank deposits | 128,815 | 368,429 | |||||||
Purchase of intangible assets | (1,487 | ) | (5,980 | ) | |||||
Other investing activities | (1,585 | ) | 84 | ||||||
Investments in unconsolidated entities | (6,274 | ) | (67,274 | ) | |||||
Net cash provided by (used in) investing activities | 10,845 | (23,987 | ) | ||||||
Cash flows from financing activities | |||||||||
Proceeds from exercise of stock options | 10 | 260 | |||||||
Payment of contingent consideration | (906 | ) | (1,386 | ) | |||||
Other financing activities | (188 | ) | (281 | ) | |||||
Net cash used in financing activities | (1,084 | ) | (1,407 | ) | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,703 | ) | (9,787 | ) | |||||
Net change in cash, cash equivalents and restricted cash | (45,854 | ) | (92,470 | ) | |||||
Cash, cash equivalents and restricted cash, beginning of period | 150,686 | 243,293 | |||||||
Cash, cash equivalents and restricted cash, end of period | $ | 104,832 | $ | 150,823 | |||||
Supplemental disclosures of cash flow information: | |||||||||
Non-cash investing and financing activities | |||||||||
Transfer of inventory to fixed assets | 7,316 | 6,306 | |||||||
Transfer of fixed assets to inventory | 118 | 123 | |||||||
Issuance of Common stock under employee stock purchase plan | 3,014 | ||||||||
Issuance of shares as part of Covestro acquisition (Refer to Note 3) | 5,201 | ||||||||
Contingent consideration | 2,794 | ||||||||
Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets: | |||||||||
Cash and cash equivalents | 104,563 | 150,672 | |||||||
Restricted cash included in other current assets | 269 | 151 | |||||||
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows | $ | 104,832 | $ | 150,823 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Business Description and Basis of Presentation
The results of operations for the three and nine months periods ended September 30, 2023 are not necessarily indicative of results that could be expected for the entire fiscal year. Certain financial information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The reader is referred to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 3, 2023 as part of the Company’s Annual Report on Form 20-F for such year.
Note 2. New Accounting Pronouncements
Accounting Pronouncements Adopted in 2023
U.S. $ in thousands | ||||
Fair Value, net | $ | 55,751 | ||
Net assets deconsolidated | (14,146 | ) | ||
Transaction expenses | (2,469 | ) | ||
Gain on deconsolidation of subsidiary | $ | 39,136 |
U.S. $ in thousands | ||||
Cash payments* | $ | 53,816 | ||
Issuance of ordinary shares to Covestro stockholders | 5,201 | |||
Contingent consideration at estimated fair value | 659 | |||
Total consideration | $ | 59,676 |
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Allocation of Purchase Price | ||||
(U.S. $ in thousands) | ||||
Inventory | $ | 10,342 | ||
Fixed assets | 8,245 | |||
Goodwill | 20,199 | |||
Intangible assets | 21,495 | |||
Total assets acquired | 60,281 | |||
Other current liabilities | 605 | |||
Total liabilities assumed | 605 | |||
Net assets acquired | $ | 59,676 |
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 4. Recent developments
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 5. Revenues
Disaggregation of Revenues
The following table presents the Company’s revenues disaggregated by geographical region (based on the Company's customers' locations) and revenue type for the three and nine months ended September 30, 2023 and 2022:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
(U.S. $ in thousands) | (U.S. $ in thousands) | ||||||||||||||
Americas | |||||||||||||||
Systems | $ | 30,545 | $ | 34,869 | $ | 80,706 | $ | 96,719 | |||||||
Consumables | 33,471 | 33,303 | 99,800 | 99,319 | |||||||||||
Service | 37,809 | 39,281 | 113,594 | 117,207 | |||||||||||
Total Americas | 101,825 | 107,453 | 294,100 | 313,245 | |||||||||||
EMEA | |||||||||||||||
Systems | 14,967 | 11,811 | 38,423 | 41,648 | |||||||||||
Consumables | 18,654 | 13,666 | 55,475 | 45,759 | |||||||||||
Service | 6,980 | 5,983 | 21,467 | 19,320 | |||||||||||
Total EMEA | 40,601 | 31,460 | 115,365 | 106,727 | |||||||||||
Asia Pacific | |||||||||||||||
Systems | 5,978 | 9,626 | 21,126 | 31,319 | |||||||||||
Consumables | 9,655 | 8,861 | 27,823 | 26,166 | |||||||||||
Service | 4,074 | 4,792 | 12,847 | 14,767 | |||||||||||
Total Asia Pacific | 19,707 | 23,279 | 61,796 | 72,252 | |||||||||||
Total Revenues | $ | 162,133 | $ | 162,192 | $ | 471,261 | $ | 492,224 |
The following table presents the Company’s revenues disaggregated based on the timing of revenue recognition (at a specific point in time or over the course of time) for the three and nine months ended September 30, 2023 and 2022:
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
(U.S. $ in thousands) | (U.S. $ in thousands) | ||||||||||||||
Revenues recognized in point in time from: | |||||||||||||||
Products | $ | 113,270 | $ | 112,133 | $ | 323,353 | $ | 340,927 | |||||||
Services | 13,303 | 13,519 | 41,150 | 39,158 | |||||||||||
Total revenues recognized in point in time | 126,573 | 125,652 | 364,503 | 380,085 | |||||||||||
Revenues recognized over time from: | |||||||||||||||
Services | 35,560 | 36,540 | 106,758 | 112,139 | |||||||||||
Total revenues recognized over time | 35,560 | 36,540 | 106,758 | 112,139 | |||||||||||
Total Revenues | $ | 162,133 | $ | 162,192 | $ | 471,261 | $ | 492,224 |
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Contract Assets and Contract Liabilities
Contract assets are recorded when the Company's right to consideration is conditional on constraints other than the passage of time. The Company had no material contract assets as of September 30, 2023 and December 31, 2022.
Contract liabilities include advance payments and billings in excess of revenue recognized, which are primarily related to advanced billings for service type warranty. Contract liabilities are presented under deferred revenue. The Company's deferred revenue as of September 30, 2023 and December 31, 2022 were as follows:
September 30, 2023 | December 31, 2022 | ||||||
U.S. $ in thousands | |||||||
Deferred revenue* | $ | 80,310 | $ | 75,434 |
*Includes $28.5 million and $25.2 million under long-term deferred revenue in the Company's consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.
Revenue recognized in 2023 that was included in deferred revenue balance as of December 31, 2022 was $8.8 million and $36.7 million for the three and nine months ended September 30, 2023.
Remaining Performance Obligations
Remaining Performance Obligations (“RPO“) represent contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of September 30, 2023, the total RPO amounted to $93.5 million. The Company expects to recognize $61.8 million of this RPO during the next 12 months, $19.9 million over the subsequent 12 months and the remaining $11.7 million thereafter.
Incremental Costs of Obtaining a Contract
Sales commissions earned mainly by the Company’s sales agents are considered incremental costs of obtaining a contract with a customer, as the Company expects the benefit of those commissions to be longer than one year. The majority of the sales commissions are not subject to capitalization, as the commission expense is recognized as the related revenue is recognized. Sales commissions for initial contracts related to the service type warranty are deferred and then amortized on a straight-line basis over the expected customer relationship period if the Company expects to recover those costs. Amortization expense is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. As of September 30, 2023 and December 31, 2022, the deferred commissions amounted to $9.8 million and $9.6 million, respectively.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 6. Inventories
Inventories consisted of the following as of the below balance sheet dates:
September 30, 2023 | December 31, 2022 | ||||||
U.S. $ in thousands | |||||||
Finished goods | $ | 86,980 | $ | 81,564 | |||
Work-in-process | 10,595 | 7,562 | |||||
Raw materials | 99,845 | 104,928 | |||||
$ | 197,420 | $ | 194,054 |
Note 7. Goodwill and Other Intangible Assets
Goodwill
U.S. $ in thousands | ||||
Goodwill as of January 1, 2023 | $ | 64,953 | ||
Goodwill acquired | 24,973 | |||
Foreign currency translation adjustments | 261 | |||
Goodwill as of September 30, 2023 | $ | 90,187 |
Other Intangible Assets
Other intangible assets consisted of the following as of the below balance sheet dates:
September 30, 2023 | December 31, 2022 | |||||||||||||||||||||||
Carrying Amount, | Net | Carrying Amount, | Net | |||||||||||||||||||||
Net of | Accumulated | Book | Net of | Accumulated | Book | |||||||||||||||||||
Impairment | Amortization | Value | Impairment | Amortization | Value | |||||||||||||||||||
U.S. $ in thousands | ||||||||||||||||||||||||
Developed technology | $ | 406,822 | $ | (296,590 | ) | $ | 110,232 | $ | 387,603 | $ | (283,671 | ) | $ | 103,932 | ||||||||||
Patents | 18,963 | (9,989 | ) | 8,974 | 17,508 | (8,970 | ) | 8,538 | ||||||||||||||||
Trademarks and trade names | 21,355 | (15,224 | ) | 6,131 | 16,278 | (14,030 | ) | 2,248 | ||||||||||||||||
Customer relationships | 107,948 | (92,084 | ) | 15,864 | 93,609 | (86,925 | ) | 6,684 | ||||||||||||||||
Capitalized software development costs | 7,066 | (7,066 | ) | 7,066 | (7,066 | ) | ||||||||||||||||||
$ | 562,154 | $ | (420,953 | ) | $ | 141,201 | $ | 522,064 | $ | (400,662 | ) | $ | 121,402 |
Amortization expenses relating to intangible assets for the three-month periods ended September 30, 2023 and 2022 were approximately $7.0 million and $9.0 million, respectively. Amortization expenses relating to intangible assets for the nine-month periods ended September 30, 2023 and 2022 were approximately $20.5 million and $27.4 million, respectively.
As of September 30, 2023, the estimated amortization expenses relating to intangible assets for each of the following future periods were as follows:
Estimated | ||||
amortization expenses | ||||
(U.S. $ in thousands) | ||||
Remaining 3 months of 2023 | $ | 7,368 | ||
2024 | 23,725 | |||
2025 | 22,323 | |||
2026 | 22,246 | |||
2027 | 20,845 | |||
2028 and thereafter | 44,694 | |||
Total | $ | 141,201 |
Note 8. Net Loss Per Share
The following table presents the numerator and denominator of the basic and diluted net loss per share computations for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
In thousands, except per share amounts | In thousands, except per share amounts | ||||||||||||||
Numerator: | |||||||||||||||
Net income(loss) for basic and diluted net loss per share | $ | (47,279 | ) | $ | 18,749 | $ | (108,118 | ) | $ | (26,584 | ) | ||||
Denominator: | |||||||||||||||
Weighted average shares - for basic net income(loss) per share | 69,093 | 66,772 | 68,432 | 66,356 | |||||||||||
Weighted average shares - for diluted net income(loss) per share | 69,093 | 67,038 | 68,432 | 66,356 | |||||||||||
Net income(loss) per share | |||||||||||||||
$ | (0.68 | ) | $ | 0.28 | $ | (1.58 | ) | $ | (0.40 | ) |
The computation of diluted net loss per share excluded share awards of 2.4 million shares and 4.1 million shares for the three months ended September 30, 2023 and 2022, respectively, because the inclusion of those shares would have had an anti-dilutive effect on the diluted net loss per share.
The computation of diluted net loss per share excluded share awards of 2.1 million shares and 5.0 million shares for the nine months ended September 30, 2023 and 2022, respectively, because the inclusion of those shares would have had an anti-dilutive effect on the diluted net loss per share.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 9. Income Taxes
Note 10. Fair Value Measurements
Financial instruments measured at fair value
The following table summarizes the Company’s financial assets and liabilities that are carried at fair value on a recurring basis, in its consolidated balance sheets:
September 30, 2023 | December 31, 2022 | ||||||||||||||
Level 2 | Level 3 | Level 2 | Level 3 | ||||||||||||
(U.S. $ in thousands) | |||||||||||||||
Assets: | |||||||||||||||
Foreign exchange forward contracts not designated as hedging instruments | $ | 58 | $ | $ | 159 | $ | |||||||||
Foreign exchange forward contracts designated as hedging instruments | 920 | 3 | |||||||||||||
Convertible notes | 5,423 | 1,894 | |||||||||||||
Liabilities: | |||||||||||||||
Foreign exchange forward contracts not designated as hedging instruments | (7 | ) | (38 | ) | |||||||||||
Foreign exchange forward contracts designated as hedging instruments | (2,129 | ) | (1,640 | ) | |||||||||||
Contingent consideration* | (41,221 | ) | (38,341 | ) | |||||||||||
$ | (1,158 | ) | $ | (35,798 | ) | $ | (1,516 | ) | $ | (36,447 | ) |
The Company's foreign exchange forward contracts are classified as Level 2, as they are not actively traded and are valued using pricing models that use observable market inputs, including interest rate curves and both forward and spot prices for currencies (Level 2 inputs).
Contingent consideration represents liabilities recorded at fair value in connection with acquisitions, and thus represents a Level 3 measurement within the fair value hierarchy (refer to Note 3).
Other financial instruments consist mainly of cash and cash equivalents, short-term deposits, current and non-current receivables, accounts payable and other current liabilities. The fair value of these financial instruments approximates their carrying values.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 11. Derivative instruments and hedging activities
Since the Company conducts its operations globally, it is exposed to global market risks and to the risk that its earnings, cash flows and equity could be adversely impacted by fluctuations in foreign currency exchange rates. The Company enters into transactions involving foreign currency exchange derivative financial instruments. The Company manages its foreign currency exposures on a consolidated basis, which allows the Company to net exposures and take advantage of any natural hedging. The transactions are designed to manage the Company’s net exposure to foreign currency exchange rates and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. The Company does not enter into derivative transactions for trading purposes.
The Company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities and forecasted transactions denominated in the New Israeli Shekel (“NIS”), Euro, British Pound, Korean Won, Chinese Yuan and the Japanese Yen. The gains and losses on the hedging instruments partially offset losses and gains on the hedged items. Financial markets and currency volatility may limit the Company’s ability to hedge these exposures. These contracts mature through December 2023.
The following table summarizes the consolidated balance sheets classification and fair values of the Company’s derivative instruments:
Fair Value | Notional Amount | |||||||||||||||||
September 30, | December 31, | September 30, | December 31, | |||||||||||||||
Balance sheet location | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
U.S. $ in thousands | ||||||||||||||||||
Assets derivatives -Foreign exchange contracts, not designated as hedging instruments | Other current assets | $ | 58 | $ | 159 | $ | 41,202 | $ | 101,733 | |||||||||
Assets derivatives -Foreign exchange contracts, designated as cash flow hedge | Other current assets | 920 | 3 | 24,798 | 4,900 | |||||||||||||
Liability derivatives -Foreign exchange contracts, not designated as hedging instruments | Accrued expenses and other current liabilities | (7 | ) | (38 | ) | 15,962 | 16,751 | |||||||||||
Liability derivatives -Foreign exchange contracts, designated as hedging instruments | Accrued expenses and other current liabilities | (2,129 | ) | (1,640 | ) | 46,807 | 72,273 | |||||||||||
$ | (1,158 | ) | $ | (1,516 | ) | $ | 128,769 | $ | 195,657 |
Foreign exchange contracts not designated as hedging instruments
As of September 30, 2023, the notional amounts of the Company’s outstanding exchange forward contracts, not designated as hedging instruments, were $57.2 million, and were used to reduce foreign currency exposures. With respect to such derivatives, a gain of $1.3 million and a gain of $2.9 million were recognized under financial expenses, net for the three-month periods ended September 30, 2023 and 2022, respectively and a gain of $2.6 million and a gain of $6.0 million were recognized under financial expenses, net for the nine-month periods ended September 30, 2023 and 2022, respectively. Such gains or losses partially offset the foreign currency revaluation changes of the balance sheet items. These foreign currencies revaluation changes are also recognized under financial income, net.
Cash Flow Hedging - Hedges of forecasted foreign currency payroll and other operating expenses
As of September 30, 2023, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of $51.6 million into NIS. The Company uses short-term cash flow hedge contracts to reduce its exposure to variability in expected future cash flows resulting mainly from payroll costs and other operating expenses denominated in NIS. The changes in fair value of those contracts are included in the Company’s accumulated other comprehensive loss.
Cash Flow Hedging - Hedges of forecasted foreign currency revenue
As of September 30, 2023, the Company had in effect foreign exchange forward contracts, designated as cash flow hedges for accounting purposes, for the conversion of 20.0 million Euro into U.S. dollars. The Company transacts business in U.S. dollars and in various other currencies. The Company may use foreign exchange or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months. The Company enters into these foreign exchange contracts to hedge a portion of its forecasted foreign currency denominated revenue in the normal course of business, and accordingly, they are not speculative in nature.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Note 12. Equity
a. Stock-based compensation plans
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
U.S $ in thousands | U.S $ in thousands | ||||||||||||||
Cost of revenues | $ | 891 | $ | 1,061 | $ | 2,822 | $ | 3,041 | |||||||
Research and development, net | 1,605 | 1,487 | 5,561 | 4,879 | |||||||||||
Selling, general and administrative | 4,985 | 4,843 | 15,361 | 16,835 | |||||||||||
Total stock-based compensation expenses | $ | 7,481 | $ | 7,391 | $ | 23,744 | $ | 24,755 |
A summary of the Company’s stock option activity for the nine months ended September 30, 2023 is as follows:
Number of Options | Weighted Average Exercise Price | ||||||
Options outstanding as of January 1, 2023 | 1,619,559 | 27.62 | |||||
Granted | 54,632 | 14.54 | |||||
Exercised | (2,549 | ) | 3.56 | ||||
Forfeited | (312,921 | ) | 55.29 | ||||
Options outstanding as of September 30, 2023 | 1,358,721 | 21.03 | |||||
Options exercisable as of September 30, 2023 | 1,003,935 | 22.41 |
As of September 30, 2023, the unrecognized compensation cost of $2.5 million related to all unvested, equity-classified stock options is expected to be recognized as an expense over a weighted-average period of 2.4 years.
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
A summary of the Company’s RSUs and PSUs activity for the nine months ended September 30, 2023 is as follows:
Number of RSUs and PSUs | Weighted Average Grant Date Fair Value | ||||||
Unvested as of January 1, 2023 | 3,496,099 | 23.98 | |||||
Granted | 1,832,498 | 13.28 | |||||
Vested | (1,485,905 | ) | 23.52 | ||||
Forfeited | (275,910 | ) | 23.48 | ||||
Unvested as of September 30, 2023 | 3,566,782 | 18.71 |
The fair value of RSUs and PSUs is determined based on the quoted price of the Company’s ordinary shares on the date of the grant.
As of September 30, 2023, the unrecognized compensation cost of $51.26 million related to all unvested, equity-classified RSUs and PSUs is expected to be recognized as expense over a weighted-average period of 2.52 years.
In accordance with ASC Topic 718, the ESPP is considered compensatory and, as such, results in recognition of stock-based compensation expenses.
b. Accumulated other comprehensive loss
The following tables present the changes in the components of accumulated other comprehensive income (loss), net of taxes, for the nine months ended September 30, 2023 and 2022, respectively:
Nine Months Ended September 30, 2023 | |||||||||||
Net Unrealized Gain (Loss) on Cash Flow Hedges | Foreign Currency Translation Adjustments | Total | |||||||||
U.S. $ in thousands | |||||||||||
Balance as of January 1, 2023 | $ | (299 | ) | $ | (12,519 | ) | $ | (12,818 | ) | ||
Other comprehensive income (loss) before reclassifications | (3,122 | ) | 482 | (2,640 | ) | ||||||
Amounts reclassified from accumulated other comprehensive loss | 2,500 | 2,500 | |||||||||
Other comprehensive loss | (622 | ) | 482 | (140 | ) | ||||||
Balance as of September 30, 2023 | $ | (921 | ) | $ | (12,037 | ) | $ | (12,958 | ) |
Nine Months Ended September 30, 2022 | |||||||||||
Net Unrealized Gain (Loss) on Cash Flow Hedges | Foreign Currency Translation Adjustments | Total | |||||||||
U.S. $ in thousands | |||||||||||
Balance as of January 1, 2022 | $ | 1,572 | $ | (10,343 | ) | $ | (8,771 | ) | |||
Other comprehensive income before reclassifications | (506 | ) | (5,089 | ) | (5,595 | ) | |||||
Amounts reclassified from accumulated other comprehensive loss | 143 | 143 | |||||||||
Other comprehensive income | (363 | ) | (5,089 | ) | (5,452 | ) | |||||
Balance as of September 30, 2022 | $ | 1,209 | $ | (15,432 | ) | $ | (14,223 | ) |
STRATASYS LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The Rights Plan is intended to protect the long-term interests of Stratasys and all Stratasys shareholders. The Rights Plan is designed to reduce the likelihood that any entity, person, or group would gain control of, or significant influence over, Stratasys through the open-market accumulation of the Company’s shares without appropriately compensating all Stratasys shareholders for control. The Rights Plan will encourage anyone seeking to gain a significant interest in Stratasys to negotiate directly with the Board prior to attempting to control or significantly influence the Company. Further to those goals, the Rights may cause substantial dilution to a person or group that acquires 15% or more of the ordinary shares or any existing holder of 15% or more of the ordinary shares who shall acquire any additional ordinary shares.
Note 13. Contingencies
Legal proceedings
OPERATING AND FINANCIAL REVIEW AND PROSPECTS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included as Exhibit 99.1 to the Report of Foreign Private Issuer on Form 6-K to which this Operating and Financial Review and Prospects is attached, or the Form 6-K. The discussion below contains forward-looking statements (within the meaning of the United States federal securities laws) that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in "Forward-Looking Statements and Factors that May Affect Future Results of Operations", below, as well in the “Risk Factors” in Item 3.D of our Annual Report on Form 20-F for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC, on March 3, 2023, or our 2022 Annual Report, as updated by the “Risk Factors” section below.
Overview of Business and Trend Information
Summary of Financial Results
Results of Operations
Comparison of Three Months Ended September 30, 2023 to Three Months Ended September 30, 2022
The following table sets forth certain statement of operations data for the periods indicated:
Three Months Ended September 30, | |||||||||||||||
2023 | 2022 | ||||||||||||||
U.S. $ in thousands | % of Revenues | U.S. $ in thousands | % of Revenues | ||||||||||||
Revenues | $ | 162,133 | 100.0 | % | $ | 162,192 | 100.0 | % | |||||||
Cost of revenues | 96,484 | 59.5 | % | 91,443 | 56.4 | % | |||||||||
Gross profit | 65,649 | 40.5 | % | 70,749 | 43.6 | % | |||||||||
Research and development, net | 23,567 | 14.5 | % | 23,145 | 14.3 | % | |||||||||
Selling, general and administrative | 84,880 | 52.4 | % | 63,230 | 39.0 | % | |||||||||
Operating loss | (42,798 | ) | (26.4 | )% | (15,626 | ) | (9.6 | )% | |||||||
Gain from deconsolidation of subsidiary | - | 0.0 | % | 39,136 | 24.1 | % | |||||||||
Financial income, net | 687 | 0.4 | % | 452 | 0.3 | % | |||||||||
Income(loss) before income taxes | (42,111 | ) | (26.0 | )% | 23,962 | 14.8 | % | ||||||||
Income tax expenses | (645 | ) | (0.4 | )% | (3,298 | ) | (2.0 | )% | |||||||
Share in losses of associated companies | (4,523 | ) | (2.8 | )% | (1,915 | ) | (1.2 | )% | |||||||
Net income (loss) | (47,279 | ) | (29.2 | )% | 18,749 | 11.6 | % |
Discussion of Results of Operations
Revenues
Our products and services revenues in the three months ended September 30, 2023 and 2022, as well as the percentage change reflected thereby, were as follows:
Three Months Ended September 30, | |||||||||||||||
2023 | 2022 | % Change | |||||||||||||
U.S. $ in thousands | |||||||||||||||
Products | $ | 113,270 | $ | 112,133 | 1.0 | % | |||||||||
Services | 48,863 | 50,059 | (2.4 | )% | |||||||||||
Total Revenues | $ | 162,133 | $ | 162,192 | 0.0 | % |
Services Revenues
Revenues by Region
Revenues and the percentage of revenues by region for the three months ended September 30, 2023 and 2022, as well as the percentage change in revenues in each such region reflected thereby, were as follows:
Three Months Ended September 30, | ||||||||||||||||||||
2023 | 2022 | % Change | ||||||||||||||||||
U.S.$ in thousands | % of Revenues | U.S.$ in thousands | % of Revenues | |||||||||||||||||
Americas* | $ | 101,815 | 62.8 | % | $ | 107,453 | 66.3 | % | (5.2 | )% | ||||||||||
EMEA | 40,611 | 25.0 | % | 31,460 | 19.4 | % | 29.1 | % | ||||||||||||
Asia Pacific | 19,707 | 12.2 | % | 23,279 | 14.3 | % | (15.3 | )% | ||||||||||||
$ | 162,133 | 100.0 | % | $ | 162,192 | 100.0 | % | 0.0 | % |
* Represent the United States, Canada and Latin America
Gross Profit
Gross profit from our products and services, as well as the percentage change reflected thereby, were as follows:
Three Months Ended September 30, | ||||||||||||
2023 | 2022 | |||||||||||
U.S. $ in thousands | Change in % | |||||||||||
Gross profit attributable to: | ||||||||||||
Products | $ | 53,724 | $ | 56,217 | (4.4 | )% | ||||||
Services | 11,925 | 14,532 | (17.9 | )% | ||||||||
$ | 65,649 | $ | 70,749 | (7.2 | )% |
Gross profit as a percentage of revenues from our products and services was as follows:
Three Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Gross profit as a percentage of revenues from: | ||||||||
Products | 47.4 | % | 50.1 | % | ||||
Services | 24.4 | % | 29.0 | % | ||||
Total gross margin | 40.5 | % | 43.6 | % |
Operating Expenses
The amount of each type of operating expense for the three months ended September 30, 2023 and 2022, as well as the percentage change reflected thereby, and total operating expenses as a percentage of our total revenues in each such quarter, were as follows:
Three Months Ended September 30, | ||||||||||||
2023 | 2022 | % Change | ||||||||||
U.S. $ in thousands | ||||||||||||
Research and development, net | $ | 23,567 | $ | 23,145 | 1.8 | % | ||||||
Selling, general and administrative | 84,880 | 63,230 | 34.2 | % | ||||||||
108,447 | 86,375 | 25.6 | % | |||||||||
Percentage of revenues | 66.9 | % | 53.3 | % | 13.6 | % |
Operating Loss
Operating loss and operating loss as a percentage of our total revenues were as follows:
Three Months Ended September 30, | |||||||||
2023 | 2022 | ||||||||
U.S. $ in thousands | |||||||||
Operating loss | $ | (42,798 | ) | $ | (15,626 | ) | |||
Percentage of revenues | (26.4 | )% | (9.6 | )% |
Financial Income (Expenses), net
Income Taxes
Income tax benefit (expenses) and income tax benefit (expenses) as a percentage of net loss before taxes were as follows:
Three Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
U.S. $ in thousands | ||||||||
Income tax benefit (expenses) | $ | (645 | ) | $ | (3,298 | ) | ||
As a percentage of loss before income taxes | (1.5 | )% | (13.8 | )% |
We had an effective tax rate of (1.5)% for the three-month period ended September 30, 2023, compared to an effective tax rate of (13.8)% for the three-month period ended September 30, 2022. Our effective tax rate in the third quarter of 2023 was primarily impacted by the geographic mix of foreign taxable earnings and losses, as well as our valuation allowance.
Share in Losses of Associated Companies
Net Loss and Net Loss Per Share
Net loss, and net loss per share were as follows:
Three Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
U.S. $ in thousands | ||||||||
Net income (loss) | $ | (47,279 | ) | $ | 18,749 | |||
Percentage of revenues | (29.2 | )% | 11.6 | % | ||||
Basic and diluted net loss per share | $ | (0.68 | ) | $ | 0.28 |
Net loss per share was $0.68 for the three months ended September 30, 2023 as compared to net income per share of $0.28 for the three months ended September 30, 2022. The weighted average fully diluted share count was 69.1 million during the three months ended September 30, 2023, compared to 67.0 million during the three months ended September 30, 2022.
Results of Operations
Comparison of Nine Months Ended September 30, 2023 to Nine Months Ended September 30, 2022
The following table sets forth certain statement of operations data for the periods indicated:
Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | ||||||||||||||
U.S. $ in thousands | % of Revenues | U.S. $ in thousands | % of Revenues | ||||||||||||
Revenues | $ | 471,261 | 100.0 | % | $ | 492,224 | 100.0 | % | |||||||
Cost of revenues | 273,995 | 58.1 | % | 284,405 | 57.8 | % | |||||||||
Gross profit | 197,266 | 41.9 | % | 207,819 | 42.2 | % | |||||||||
Research and development, net | 69,347 | 14.7 | % | 71,489 | 14.5 | % | |||||||||
Selling, general and administrative | 221,173 | 46.9 | % | 195,085 | 39.6 | % | |||||||||
Operating loss | (93,254 | ) | (19.8 | )% | (58,755 | ) | (11.9 | )% | |||||||
Gain from deconsolidation of subsidiary | - | 0.0 | % | 39,136 | 8.0 | % | |||||||||
Financial income (expenses), net | 2,147 | 0.5 | % | (2,080 | ) | (0.4 | )% | ||||||||
Loss before income taxes | (91,107 | ) | (19.3 | )% | (21,699 | ) | (4.4 | )% | |||||||
Income tax expenses | (5,145 | ) | (1.1 | )% | (2,796 | ) | (0.6 | )% | |||||||
Share in losses of associated companies | (11,866 | ) | (2.5 | )% | (2,089 | ) | (0.4 | )% | |||||||
Net loss | (108,118 | ) | (22.9 | )% | (26,584 | ) | (5.4 | )% |
Discussion of Results of Operations
Revenues
Our products and services revenues in the nine months ended September 30, 2023 and 2022, as well as the percentage change reflected thereby, were as follows:
Nine Months Ended September 30, | ||||||||||||
2023 | 2022 | % Change | ||||||||||
U.S. $ in thousands | ||||||||||||
Products | $ | 323,353 | $ | 340,927 | (5.2 | )% | ||||||
Services | 147,908 | 151,297 | (2.2 | )% | ||||||||
Total Revenues | $ | 471,261 | $ | 492,224 | (4.3 | )% |
Products Revenues
Services Revenues
Revenues by Region
Revenues and the percentage of revenues by region for the nine months ended September 30, 2023 and 2022, as well as the percentage change in revenues in each such region reflected thereby, were as follows:
Nine Months Ended September 30, | ||||||||||||||||||||
2023 | 2022 | % Change | ||||||||||||||||||
U.S.$ in thousands | % of Revenues | U.S.$ in thousands | % of Revenues | |||||||||||||||||
Americas* | $ | 294,099 | 62.4 | % | $ | 313,245 | 63.6 | % | (6.1 | )% | ||||||||||
EMEA | 115,365 | 24.5 | % | 106,727 | 21.7 | % | 8.1 | % | ||||||||||||
Asia Pacific | 61,797 | 13.1 | % | 72,252 | 14.7 | % | (14.5 | )% | ||||||||||||
$ | 471,261 | 100.0 | % | $ | 492,224 | 100.0 | % | (4.3 | )% |
* Consists of the United States, Canada and Latin America
Gross Profit
Gross profit from our products and services, as well as the percentage change reflected thereby, were as follows:
Nine Months Ended September 30, | ||||||||||||
2023 | 2022 | |||||||||||
U.S. $ in thousands | Change in % | |||||||||||
Gross profit attributable to: | ||||||||||||
Products | $ | 155,118 | $ | 164,506 | (5.7 | ) % | ||||||
Services | 42,148 | 43,313 | (2.7 | ) % | ||||||||
$ | 197,266 | $ | 207,819 | (5.1 | ) % |
Gross profit as a percentage of revenues from our products and services was as follows:
Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Gross profit as a percentage of revenues from: | ||||||||
Products | 48.0 | % | 48.3 | % | ||||
Services | 28.5 | % | 28.6 | % | ||||
Total gross margin | 41.9 | % | 42.2 | % |
Operating Expenses
The amount of each type of operating expense for the nine months ended September 30, 2023 and 2022, as well as the percentage change from period to period reflected thereby, and total operating expenses as a percentage of our total revenues in each such nine month period, were as follows:
Nine Months Ended September 30, | ||||||||||||
2023 | 2022 | % Change | ||||||||||
U.S. $ in thousands | ||||||||||||
Research and development, net | $ | 69,347 | $ | 71,489 | (3.0 | )% | ||||||
Selling, general and administrative | 221,173 | 195,085 | 13.4 | % | ||||||||
$ | 290,520 | $ | 266,574 | 9.0 | % | |||||||
Percentage of revenues | 61.6 | % | 54.2 | % |
Operating expenses were $290.5 million in the nine months ended September 30, 2023, compared to operating expenses of $266.6 million in the nine months ended September 30, 2022. The increase in operating expenses was primarily driven by costs related to prospective and potential mergers and acquisitions, our defense against a hostile tender offer and a proxy contest, and related professional fees in an aggregate amount of $30.5 million, $7.9 million higher costs driven by our recent acquisitions, partially offset by the $13.4 million reduction in expenses due to our divestiture of MakerBot in late August 2022, and favorable exchange rate.
Operating Loss
Operating loss and operating loss as a percentage of our total revenues were as follows:
Nine Months Ended September 30, | |||||||||
2023 | 2022 | ||||||||
U.S. $ in thousands | |||||||||
Operating loss | $ | (93,254 | ) | $ | (58,755 | ) | |||
Percentage of revenues | (19.8 | )% | (11.9 | )% |
Operating loss amounted to $93.3 million for the nine months ended September 30, 2023, compared to an operating loss of $58.8 million for the nine months ended September 30, 2022. Our operating loss increased both on an absolute basis, and as a percentage of our revenues in the nine months ended September 30, 2023 compared to in the nine months ended September 30, 2022, for the reasons described in the discussion of the above line items.
Financial Expenses (Income), net
Financial income, net, which was primarily comprised of foreign currencies effects, interest income and interest expenses, was $2.1 million for the nine months ended September 30, 2023, compared to $2.1 million of financial expenses, net for the nine months ended September 30, 2022.
Income Taxes
Income tax benefit (expenses) and income tax benefit (expenses) as a percentage of net loss before taxes were as follows:
Nine Months Ended September 30, | ||||||||||
2023 | 2022 | |||||||||
U.S. $ in thousands | ||||||||||
Income tax expenses | $ | (5,145 | ) | $ | (2,796 | ) | ||||
As a percent of loss before income taxes | (5.6 | )% | (12.9 | )% |
Share in Losses of Associated Companies
Share in losses of associated companies reflects our proportionate share of the losses of unconsolidated entities accounted for by using the equity method of accounting. During the nine months ended September 30, 2023, the loss from our proportionate share of the earnings of our equity method investments increased to $11.9 million, compared to a loss of $2.1 million in the nine months ended September 30, 2022. This increase in our share of those losses Resulted from our divestiture of MakerBot and investment in Ultimaker, which occurred late in August 2022 Net Loss and Net Loss Per Share
Net loss (on an absolute basis and as a percentage of revenues), and net loss per share were as follows:
Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
U.S. $ in thousands | ||||||||
Net loss | $ | (108,118 | ) | $ | (26,584 | ) | ||
Percentage of revenues | (22.9 | )% | (5.4 | )% | ||||
Basic and diluted net loss per share | $ | (1.58 | ) | $ | (0.40 | ) |
The following non-GAAP data, 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 (i) on an ongoing basis after excluding mergers, acquisitions and restructuring-related charges or gains, legal provisions and (ii) excluding non-cash items such as stock-based compensation expenses, acquired intangible assets amortization, including intangible assets amortization related to equity method investments, impairment of long-lived assets and goodwill, revaluation of our investments and the corresponding tax effect of those items.
Reconciliation of GAAP to Non-GAAP Results of Operations
The following tables present the GAAP measures, the corresponding non-GAAP amounts and the related non-GAAP adjustments for the applicable periods:
Three Months Ended September 30, | ||||||||||||||||||||||||||
2023 | Non-GAAP | 2023 | 2022 | Non-GAAP | 2022 | |||||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||||
U.S. dollars and shares in thousands (except per share amounts) | ||||||||||||||||||||||||||
Gross profit (1) | $65,649 | $12,617 | $78,266 | 70,749 | 7,990 | 78,739 | ||||||||||||||||||||
Operating income (loss) (1,2) | (42,798 | ) | 46,885 | 4,087 | (15,626 | ) | 20,149 | 4,523 | ||||||||||||||||||
Net income (loss) (1,2,3) | (47,279 | ) | 49,725 | 2,446 | 18,749 | (15,423 | ) | 3,326 | ||||||||||||||||||
Net income (loss) per diluted share (4) | $ | (0.68 | ) | $ | 0.72 | $ | 0.04 | $ | 0.28 | $ | (0.23 | ) | $ | 0.05 | ||||||||||||
(1) | Acquired intangible assets amortization expense | 5,142 | 6,941 | |||||||||||||||||||||||
Non-cash stock-based compensation expense | 891 | 1,061 | ||||||||||||||||||||||||
Restructuring and other related costs | 6,584 | (12 | ) | |||||||||||||||||||||||
12,617 | 7,990 | |||||||||||||||||||||||||
(2) | Acquired intangible assets amortization expense | 2,599 | 2,138 | |||||||||||||||||||||||
Non-cash stock-based compensation expense | 6,588 | 6,330 | ||||||||||||||||||||||||
Restructuring and other related costs | 2,360 | 1,309 | ||||||||||||||||||||||||
Revaluation of investments | 4,300 | 901 | ||||||||||||||||||||||||
Contingent consideration | 265 | 394 | ||||||||||||||||||||||||
Legal, consulting and other expenses | 18,156 | 1,087 | ||||||||||||||||||||||||
34,268 | 12,159 | |||||||||||||||||||||||||
46,885 | 20,149 | |||||||||||||||||||||||||
(3) | Corresponding tax effect | 153 | 2,993 | |||||||||||||||||||||||
Finance expenses | 162 | |||||||||||||||||||||||||
Equity method related amortization and other | 2,525 | 571 | ||||||||||||||||||||||||
Gain from deconsolidation of subsidiary | - | (39,136) | ||||||||||||||||||||||||
$49,725 | (15,423) | |||||||||||||||||||||||||
(4 | ) | Weighted average number of ordinary shares outstanding- Diluted | 69,093 | 69,815 | 67,038 | 67,038 |
Nine Months Ended September 30, | ||||||||||||||||||||||||
2023 | Non-GAAP | 2023 | 2022 | Non-GAAP | 2022 | |||||||||||||||||||
GAAP | Adjustments | Non-GAAP | GAAP | Adjustments | Non-GAAP | |||||||||||||||||||
U.S. dollars and shares in thousands (except per share amounts) | ||||||||||||||||||||||||
Gross profit (1) | $ | 197,266 | $ | 29,199 | $ | 226,465 | $ | 207,819 | $ | 27,593 | $ | 235,412 | ||||||||||||
Operating income (loss) (1,2) | (93,254 | ) | 103,866 | 10,612 | (58,755 | ) | 67,235 | 8,480 | ||||||||||||||||
Net income (loss) (1,2,3) | (108,118 | ) | 114,179 | 6,061 | (26,584 | ) | 32,295 | 5,711 | ||||||||||||||||
Net income (loss) per diluted share (4) | $ | (1.58 | ) | $ | 1.67 | $ | 0.09 | $ | (0.40 | ) | $ | 0.49 | $ | 0.09 | ||||||||||
(1) | Acquired intangible assets amortization expense | 14,157 | 20,861 | |||||||||||||||||||||
Non-cash stock-based compensation expense | 2,822 | 3,041 | ||||||||||||||||||||||
Restructuring and other related costs | 12,220 | 3,691 | ||||||||||||||||||||||
29,199 | 27,593 | |||||||||||||||||||||||
(2) | Acquired intangible assets amortization expense | 7,479 | 6,581 | |||||||||||||||||||||
Non-cash stock-based compensation expense | 20,920 | 21,714 | ||||||||||||||||||||||
Restructuring and other related costs | 6,626 | 1,864 | ||||||||||||||||||||||
Revaluation of investments | 4,880 | 3,217 | ||||||||||||||||||||||
Contingent consideration | 877 | 1,197 | ||||||||||||||||||||||
Legal, consulting and other expenses | 33,885 | 5,069 | ||||||||||||||||||||||
74,667 | 39,642 | |||||||||||||||||||||||
103,866 | 67,235 | |||||||||||||||||||||||
(3) | Corresponding tax effect | 3,404 | 3,219 | |||||||||||||||||||||
Equity method related amortization and other | $ | 1,827 | $ | 571 | ||||||||||||||||||||
Finance expenses | $ | 5,081 | $ | 406 | ||||||||||||||||||||
Gain from deconsolidation of subsidiary | $ | - | $ | (39,136 | ) | |||||||||||||||||||
$ | 114,179 | $ | 32,295 | |||||||||||||||||||||
(4) | Weighted average number of ordinary shares outstanding- Diluted | 68,432 | 69,046 | 66,356 | 67,007 |
Liquidity and Capital Resources
A summary of our statements of cash flows is as follows:
Nine Months Ended September 30, | |||||||
2023 | 2022 | ||||||
U.S $ in thousands | |||||||
Net loss | $ | (108,118 | ) | $ | (26,584 | ) | |
Depreciation and amortization | 37,198 | 44,451 | |||||
Impairment of other long-lived assets | 4,471 | 3,865 | |||||
Stock-based compensation | 23,744 | 24,755 | |||||
Foreign currency transactions loss | 4,087 | 13,978 | |||||
Gain from deconsolidation of subsidiary | - | (39,136 | ) | ||||
Other non-cash items, net | 20,041 | 6,132 | |||||
Change in working capital and other items | (35,335 | ) | (84,750 | ) | |||
Net cash used in operating activities | (53,912 | ) | (57,289 | ) | |||
Net cash provided by investing activities | 10,845 | (23,987 | ) | ||||
Net cash used in financing activities | (1,084 | ) | (1,407 | ) | |||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,703 | ) | (9,787 | ) | |||
Net change in cash, cash equivalents and restricted cash | (45,854 | ) | (92,470 | ) | |||
Cash, cash equivalents and restricted cash, beginning of period | 150,686 | 243,293 | |||||
Cash, cash equivalents and restricted cash, end of period | 104,832 | 150,823 |
Cash used in operating activities
Cash flows from investing activities
Cash used in financing activities
Capital resources and capital expenditures
Critical Accounting Estimates
Forward-Looking Statements and Factors That May Affect Future Results of Operations
•
the extent of our success at introducing new or improved products and solutions that gain market share;
•
the extent of growth of the 3D printing market generally;
•
the global macro-economic environment, including headwinds caused by inflation, rising interest rates, changing currency exchange rates and potential recessionary conditions;
•
changes in our overall strategy, including as related to any restructuring activities and our capital expenditures;
•
the impact of shifts in prices or margins of the products that we sell or services we provide;
•
the impact of competition and new technologies;
•
the outcome and degree of success of our board’s comprehensive process to explore strategic alternatives for our company;
•
the degree to which our company’s operations remain resistant to potential adverse effects of Israel’s war against the terrorist organization Hamas, despite our Israeli headquarters, facilities and significant operations; the impact of unsolicited non-binding indicative proposals by 3D Systems to acquire our company on our efforts to pursue alternative transactions that we believe may be more beneficial for maximizing value for our shareholders;
•
•
the extent of our success at efficiently and successfully integrating the operations of various companies that we have acquired or may acquire;
•
the degree of our success at locating and acquiring additional value-enhancing, inorganic technology that furthers our business plan to lead in the realm of polymers;
•
the potential adverse effects that inflation, and actions taken to reduce inflation, such as increased interest rates, are having or may have on the macro-economic environment, and the degree of our resilience (and that of our customers and suppliers) to those effects, which may have significant consequences for our operations, financial position and cash flows;
•
global market, political and economic conditions, and in the countries in which we operate in particular;
•
government regulations and approvals;
•
litigation and regulatory proceedings;
•
infringement of our intellectual property rights by others (including for replication and sale of consumables for use in our systems), or infringement of others’ intellectual property rights by us;
•
potential cyber attacks against, or other breaches to, our information technologies systems;
• the extent of our success at maintaining our liquidity and financing our operations and capital needs;
•
impact of tax regulations on our results of operations and financial conditions;
•
those factors referred to in Item 3.D, “Key Information - Risk Factors”, Item 4, “Information on the Company”, and Item 5, “Operating and Financial Review and Prospects” in our 2022 Annual Report, as supplemented herein, as well as in other portions of the 2022 Annual Report Readers are urged to carefully review and consider the various disclosures made throughout the Form 6-K, our 2022 Annual Report, and in 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
LEGAL PROCEEDINGS
RISK FACTORS