STRATASYS LTD. annual report, Q4 FY2022

Stratasys Ltd. — FY2022 Form 20-F

Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide clear Q4-only financial results. Financial statements are prepared under U.S. GAAP. Stratasys sells polymer 3D-printing systems, consumables, software and services, and additive-manufacturing parts.

Key financial results

MetricFY2022FY2021Change / context
Revenue$651.5 million$607.2 millionUp 7.3%; above 2019 pre-pandemic levels by 2.4%
Products revenue$452.1 million$417.6 millionUp 8.3%; systems revenue rose 12.6%, consumables 4.3%
Services revenue$199.4 million$189.7 millionUp 5.1%
Gross profit / margin$276.5 million / 42.4%$260.1 million / 42.8%Gross profit up 6.3%; margin down 0.4 percentage points
Operating loss$57.2 million$79.2 millionLoss narrowed; operating margin improved from (13.0%) to (8.8%)
Net loss / diluted loss per share$29.0 million / $0.44$62.0 million / $0.98Loss narrowed substantially
Non-GAAP net income / diluted EPS$10.3 million / $0.15Non-GAAP net loss $4.3 million / $(0.07)Company-defined non-GAAP measures; adjustments exclude specified items
Operating cash flow$(75.4) million$35.8 millionTurned negative, primarily due to working-capital use
Cash, equivalents and short-term deposits$327.8 million$502.2 millionDown $174.3 million; figures include restricted cash in the comparative cash-flow discussion
Total assets / total liabilities$1,259.8 million / $300.4 million$1,277.2 million / $321.2 millionCurrent assets $700.2 million; current liabilities $210.7 million
DebtManagement says it had no debt—Leases and contingent consideration remain liabilities; filing also refers to a Bank of America credit agreement

Changes and notable items

  • Revenue growth reflected higher systems sales, consumables usage and services, partly offset by MakerBot’s September 2022 divestiture and adverse currency effects.
  • Operating expenses fell 1.7% to $333.6 million. Lower acquisition-related contingent-consideration expense was partly offset by higher employee costs and acquisition-related headcount.
  • The MakerBot–Ultimaker transaction generated a $39.1 million gain on deconsolidation. Stratasys retained a 46.5% equity interest, recorded at $105.6 million initially; the investment stood at $100.2 million at year-end after equity-method losses.
  • Working capital absorbed $105.3 million of cash, principally as inventory increased $87.3 million and receivables increased. Year-end inventory was $194.1 million, up from $129.1 million.
  • Year-end cash and short-term deposits declined despite no debt, while long-term investments rose to $141.6 million, including the Ultimaker investment.
  • Goodwill was $65.0 million; no impairment was recorded in 2022. The Stratasys-Core reporting unit’s estimated fair value exceeded carrying value by approximately 45%, based on management’s discounted cash-flow assumptions.

Outlook, commentary and risks

  • Management expected 2023 revenue to grow sequentially, driven in part by anticipated later-year product introductions. The supplied filing text does not provide clear numerical 2023 revenue or earnings guidance.
  • Management expects margins to improve as supply-chain and inflationary pressures ease, new technologies ramp and product mix improves; timing and realization are uncertain. Price increases were used to offset higher costs.
  • Management said liquidity and the absence of debt position the company to manage macroeconomic uncertainty, while emphasizing cost controls, cash generation and continued investment in product development.
  • Principal risks include inflation, higher interest rates and possible recession; customer financing and demand; supply-chain disruptions and sole-source PolyJet printhead supply from Ricoh; foreign-exchange exposure, particularly the shekel and euro; competition, product mix and consumables substitution; acquisition integration and contingent payments; cybersecurity, litigation and intellectual-property claims; and political, security, tax and regulatory risks in Israel.
  • Contingent consideration liabilities for Origin and Xaar were $38.3 million at year-end; potential future payments could reach $61 million in aggregate. The company also had approximately $144.8 million of supplier purchase-order obligations due during 2023.
  • The planned Covestro additive-manufacturing materials acquisition was expected to close in Q2 2023 for approximately $42.3 million, plus inventory adjustments and subject to a potential earnout of up to $36.4 million.
  • On November 13, 2022, Stratasys released approximately $44.8 million of Israeli tax-exempt profits and paid approximately $2.9 million in reduced tax. About $160.6 million of such profits remained at year-end, with estimated tax of approximately $16.1 million if distributed.

Important facts for investors to verify

  • Review the audited statements and cash-flow detail, especially the sharp shift to negative operating cash flow and the inventory build.
  • Reconcile reported GAAP losses with management’s non-GAAP adjustments, including the MakerBot gain, stock-based compensation, amortization and contingent-consideration revaluations.
  • Assess whether 2023 sequential growth and margin improvement depend on product launches, easing costs and customer demand assumptions that may not materialize.
  • Track the Covestro acquisition’s completion, funding, earnout terms and expected contribution, and monitor Origin/Xaar contingent payments.
  • Confirm the nature of the Bank of America credit agreement and any restrictions or obligations, given management’s statement that the company had no debt.
  • Monitor foreign-exchange sensitivity, goodwill assumptions and the recoverability of deferred tax assets; the valuation allowance was $699.7 million at year-end.