Stratasys Revenue from Products and Services Increases 21%

MINNEAPOLIS - Stratasys, Inc today announced first quarter financial results. The company reported revenue of $23.0 million for the first quarter ended March 31, 2010, which includes a $5.0 million one-time non-cash charge against revenue. The charge against revenue represents the fair value of the warrant issued to HP (NYSE: HPQ) for 500,000 shares of Stratasys, Inc. common stock, in connection with the distribution agreement signed in January.

Non-GAAP revenue, which excludes the warrant charge, was $28.0 million for the first quarter ended March 31, 2010, a 21% increase over the $23.1 million reported for the same period in 2009. System shipments totaled 610 units for the first quarter of 2010, as compared with 591 for the same period last year.

The company reported a net loss of $443,000 for the first quarter, or $0.02 per share, compared to a net loss of $704,000, or $0.03 per share, for the same period last year.

Non-GAAP net income, which excludes the warrant charge, certain discrete items and stock-based compensation expense, was $2.9 million, or $0.14 per share, for the first quarter of 2010 compared to $5,000 for the same period last year.

Appropriate reconciliations between GAAP and non-GAAP financial measures are provided in a table at the end of this press release. The table provides itemized detail of the non-GAAP financial measures.

“Our first quarter results reflect the positive impact of the economic recovery and a subsequent improvement of business conditions within our core markets,” said Scott Crump, chairman and chief executive officer of Stratasys. “Compared to a very weak first quarter last year, we generated strong growth in our system sales, led by a 140% increase in Fortus 3D production system revenue.

“Excluding the warrant charge, gross margin expanded quarter-on-quarter and year-over-year, driven by the growth in total revenue as well as a favorable mix in product sales. Product mix continues to benefit from the relatively strong sales of our higher-priced Dimension and uPrint Plus 3D printers. In addition, operating margin percentage, excluding the warrant charge, reached the highest level since the third quarter of 2008, driven by the higher gross margin and our ongoing efforts to prudently manage operating expenses.

“During the final days of the first quarter, we began shipment of the new HP DesignJet 3D printer. These shipments were in anticipation of HP’s launch last week of the new product and its forthcoming availability in five European countries. We are excited about entering this stage of the agreement with HP and believe their expansion into the 3D printer market with Stratasys-manufactured products represents the beginning of a revolutionary new period for our company.

“Coinciding with the introduction of HP’s new DesignJet 3D printers, we recently launched an eco-friendly, automated support removal system for our uPrint line called WaveWash. The new product platform is office friendly and easy to use, and will improve upon the whole product experience for uPrint customers by providing a hands-free process to dissolve support material. HP’s strategic input was instrumental in our development of the new support removal system, which is also being sold by HP under their DesignJet brand.

“We are encouraged by the positive trends in our business during the first quarter and remain optimistic regarding the balance of 2010. Consumable revenue grew by 22% during the quarter, and could be a leading indicator of a sustainable growth trend. Although our optimism is growing, we remain cautious in our outlook and will continue to control our expenses accordingly. We maintain a healthy balance sheet, which is reflected in our growing cash balance, and we are well positioned to execute our growth plans going forward.

“Most importantly, we are excited to begin the distribution phase of our agreement with HP. We believe HP’s unmatched sales and distribution capabilities are the ideal complement to our current channel. Within our market, their brand awareness and marketing muscle has the potential of driving a significant expansion in our 3D printer sales,” Crump concluded.