Stratasys Ltd. — FY2015 Form 20-F
Reporting period: Fiscal year ended December 31, 2015. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide a clear Q4-only revenue or earnings figure. Financial statements are prepared under U.S. GAAP.
Business context and financial results
Stratasys provides 3D printing systems, materials, and services, including its Stratasys Direct Manufacturing parts business. Results include acquired businesses, including MakerBot and the Solid Concepts and Harvest Technologies service operations.
| Metric | FY2015 | FY2014 |
|---|---|---|
| Net sales | $696.0 million | $750.1 million |
| Gross profit / margin | $102.2 million / 14.7% | $362.4 million / 48.3% |
| Operating loss | $1,373.5 million | $148.2 million |
| Net loss attributable to Stratasys | $1,372.8 million | $119.4 million |
| Diluted loss per share | $26.64 | $2.39 |
| Operating cash flow | $(21.9) million | $13.8 million |
| Cash and cash equivalents at year-end | $257.6 million | $442.1 million |
Material changes and liquidity
- Sales declined 7.2%. Product revenue fell 17.7% to $503.9 million; service revenue rose 39.2% to $192.0 million, largely reflecting a full year of Solid Concepts and Harvest operations. Systems shipped fell to 24,363 from 45,843; consumables revenue increased 5.1%.
- Management attributed weaker sales to soft capital-equipment investment in key customer industries, challenging market conditions, and currency effects. At constant exchange rates, sales declined approximately 3.5%. EMEA and Asia Pacific sales fell 19.2% and 18.8%, respectively; North America grew 1.8%.
- Stratasys recorded $942.4 million of goodwill impairment and $278.5 million of intangible-asset impairment. Total goodwill and other long-lived-asset impairment adjustments in the cash-flow reconciliation were $1,231.4 million. These were primarily non-cash charges and drove the exceptional reported loss and sharp decline in gross margin.
- Cash decreased $184.5 million during the year. Investing activities used $93.1 million, including $84.3 million of property and equipment purchases; operating activities used $21.9 million.
- The company terminated its $250 million revolving credit facility in September 2015 and repaid approximately $175 million of outstanding borrowings using cash. No short-term debt remained at year-end. Current assets were $547.1 million and current liabilities $172.7 million; working capital was $374.3 million. Management said liquidity was sufficient for operations and capital needs over the following 12 months.
Outlook, risks, and unusual items
- No quantified revenue or earnings guidance is presented in the supplied filing text. Management described market uncertainty, ongoing cost and operating-structure adjustments, and continued investment in R&D; it expected the future tax rate to be higher than the unusually low 2015 rate.
- A restructuring program begun in April 2015 included workforce reductions, facility consolidation, and store closures. FY2015 restructuring charges were $26.2 million. Headcount declined to 2,721 from 2,906.
- On March 3, 2016, the SEC’s enforcement division subpoenaed the company for documents concerning valuations and calculations used in goodwill and intangible-asset impairment assessments. The filing says the matter was at a preliminary stage and that Stratasys intended to cooperate.
- Shareholder litigation concerning earlier Objet share issuances remained in pre-trial proceedings. Consolidated U.S. securities class actions alleging misleading statements about the business and prospects were pending; the court had not ruled on the motion to dismiss.
- Key business risks include further impairment charges, sustained weak demand and price competition, product-mix and capacity pressures, integration of acquisitions, reliance on single-source suppliers, foreign-exchange exposure, and product-liability and intellectual-property claims.
- The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded disclosure controls and internal financial controls were effective at year-end.
Important facts for investors to verify
- Whether demand, system shipments, and product revenue stabilize, and whether the restructuring delivers sustainable cost savings.
- The assumptions underlying impairment valuations and whether further impairments are required; also monitor developments in the SEC inquiry.
- Cash generation, capital spending, and liquidity after repayment of the revolving facility, including remaining acquisition-related payments.
- Progress and financial performance of Stratasys Direct Manufacturing, given its growth and lower margins relative to some product lines.
- Developments and potential financial exposure from the shareholder and securities class-action litigation.