Stratasys Ltd. — FY2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 filing; the filing does not provide a clear set of Q4-only financial results. The company is a global provider of polymer-based 3D printing systems, materials, software and services, reporting under U.S. GAAP.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $520.8 million | $636.1 million |
| Gross profit / margin | $219.4 million / 42.1% | $313.7 million / 49.3% |
| Operating loss | $456.0 million | $11.7 million |
| Net loss attributable to Stratasys | $443.7 million; $8.08 per diluted share | $10.8 million; $0.20 per diluted share |
| Cash from operating activities | $27.8 million | Use of $11.2 million |
| Cash, cash equivalents and restricted cash at year-end | $272.2 million | $293.6 million |
| Working capital | $428.3 million | $499.2 million |
| Total assets / equity | $990.0 million / $759.4 million | $1,381.5 million / $1,157.2 million |
Revenue fell 18.1% year over year. Product revenue declined 21.1% and services revenue declined 11.8%. System revenue fell 25.8% and consumables revenue fell 17.0%. The gross-margin decline reflected lower sales and an unfavorable mix, as well as a $5.3 million intangible-asset impairment. The filing attributes most of the steep GAAP operating and net losses to a non-cash $386.2 million goodwill impairment; an additional $5.3 million impairment was recorded for certain intangible assets.
Operating cash flow improved from a use of $11.2 million to generation of $27.8 million, aided in part by lower inventory and receivables. Investing activities used $52.6 million, including $26.9 million for property and equipment and $29.1 million in net cash for Origin. Cash, cash equivalents and restricted cash decreased by $21.4 million during 2020. The filing also reports $27.0 million of short-term deposits; management cited approximately $299.2 million of cash, cash equivalents, short-term deposits and restricted cash combined.
The company reported no bank debt at year-end; its Bank Hapoalim loan was repaid in 2019. It had $21.8 million of operating lease liabilities and $37.4 million of Origin contingent consideration on the balance sheet. Current assets were $560.5 million and current liabilities were $132.2 million. Management said liquidity was adequate for operations and capital needs over the next 12 months.
Material changes and business developments
- Revenue declined across all regions: Americas 17.4%, EMEA 18.7% and Asia Pacific 20.5%. COVID-19 disruption and reduced customer capital spending, particularly in automotive and commercial aerospace, were principal factors.
- In the third quarter, Stratasys impaired all $386.2 million of goodwill associated with its Stratasys-Objet reporting unit. Management’s revised valuation assumed about two years to regain pre-pandemic activity levels and a 2.5% terminal growth rate, compared with 3.1% previously.
- Stratasys acquired Origin on December 31, 2020, for total consideration of approximately $97.1 million, including cash, 1.488 million shares and estimated contingent consideration of $37.4 million. The acquired P3 technology is intended to expand production-focused polymer printing. Additional contingent payments could total up to $40 million, subject to specified conditions.
- The company announced a restructuring in June 2020, including workforce reductions affecting approximately 10% of employees. The plan was substantially completed during 2020. Full-year operating expenses excluding goodwill impairment declined 11.1% from 2019.
- At year-end, the company had 56.6 million ordinary shares outstanding, versus 54.4 million a year earlier, including shares issued in connection with Origin.
Outlook, management commentary and risks
Management described the fourth quarter as the company’s strongest quarter of 2020, with sequential improvement through the year, but said Q4 results remained below the prior-year quarter. The filing gives no clear Q4 revenue or profit figure. Stratasys suspended quarterly and annual guidance beginning in Q2 2020 because of pandemic uncertainty.
For 2021, management said the four-day workweek ended at the start of the year and the company returned to a full schedule. It expected $25 million to $30 million of incremental operating costs compared with 2020, while remaining below 2019 costs, to support recovery and new technology launches. The company said it intended to continue investing in product development while monitoring cost controls. This is management commentary, not a quantified revenue or earnings forecast.
Key disclosed risks include the duration and economic effects of COVID-19; uncertain adoption and growth of additive manufacturing; competition, pricing and product mix; dependence on recurring consumables and service revenue; supplier concentration, including a sole-source supplier for PolyJet print heads; further asset impairment; acquisition integration and contingent-payment outcomes; currency exposure, especially the shekel and euro; cybersecurity and operational disruption; and Israeli political, regulatory and tax-benefit risks.
Stratasys reported that the former employee’s Israeli patent-law proceeding was dismissed in February 2020 without payment. It disclosed no other pending legal matter believed likely to have a significant effect on financial condition, profitability or cash flows. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether demand and margins recovered after year-end, particularly in automotive and aerospace, and whether management’s two-year recovery assumption proved reasonable.
- Origin’s commercial progress and achievement of earnout targets, including the potential contingent payments and the expected contribution of P3 technology.
- The carrying values and impairment assumptions for Origin goodwill and acquired intangible assets, given the substantial 2020 impairment and valuation uncertainty.
- Whether operating cash generation can support capital spending and higher planned operating costs while maintaining liquidity.
- The extent of ongoing currency, supplier, tax-benefit and geopolitical risks, and any subsequent changes to those exposures.