Stratasys Ltd. — 2018 Form 20-F summary
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter filing; quarterly results are not clearly provided in the filing text. Figures are in U.S. dollars unless stated otherwise. The company reports under U.S. GAAP.
Business context
Stratasys sells additive-manufacturing systems, materials and related services, including direct manufacturing parts services. Its platforms include FDM and PolyJet printers, alongside desktop systems, software and consulting. It operates globally, with 62% of 2018 revenue from the Americas and approximately 2,232 employees at year-end.
Financial performance
| Metric | 2018 | 2017 | Change |
|---|---|---|---|
| Revenue | $663.2 million | $668.4 million | Down 0.8% |
| Gross profit / margin | $325.2 million / 49.0% | $322.8 million / 48.3% | Margin up 0.7 percentage points |
| Operating loss | $8.8 million | $30.5 million | Loss narrowed |
| Net loss attributable to Stratasys | $11.0 million | $40.0 million | Loss narrowed |
| Diluted loss per share | $0.22 | $0.75 | Improved |
| Cash from operating activities | $63.7 million | $61.7 million | Up 3.2% |
Products revenue declined 3.7% to $456.5 million, mainly due to lower systems revenue, partly offset by 2.2% growth in consumables. Services revenue rose 6.5% to $206.7 million, including growth in customer support and direct manufacturing. Product gross margin increased to 55.4% from 53.8%; services gross margin edged up to 35.0% from 34.8%.
Reported operating expenses fell 5.4% to $334.1 million, including lower selling, general and administrative expenses, partly offset by higher R&D spending. R&D expense was $99.0 million. Non-GAAP operating income was $36.5 million, compared with $36.7 million in 2017; non-GAAP net income was $27.8 million versus $24.2 million. These non-GAAP measures exclude specified items, including acquired-intangible amortization and stock-based compensation, and should be read alongside GAAP results.
Liquidity, debt and investment
Year-end cash and cash equivalents were $393.2 million; cash, cash equivalents and restricted cash totaled $393.7 million. Working capital was $508.4 million, total assets $1.388 billion and total equity $1.142 billion. Current liabilities were $175.8 million. Management stated that available liquidity should cover operations, working capital, capital expenditures and debt requirements for at least the next 12 months.
Operating cash flow was $63.7 million; purchases of property and equipment were $23.4 million. Investing cash flow was positive $7.1 million, including $41.2 million of net proceeds from divestitures, partly offset by $13.0 million invested in unconsolidated entities. Long-term debt was $27.1 million at year-end ($5.1 million current and $22.0 million non-current). The secured Bank Hapoalim loan matures in December 2023, bears interest at LIBOR plus 3.35%, and is secured by the Rehovot facility. The company reported compliance with loan covenants.
Material changes, outlook and risks
- Revenue was broadly flat year over year, while the mix shifted toward services and consumables and away from systems. Higher-end systems revenue increased, but lower-end systems and Solidscape sales declined.
- Stratasys sold Solidscape during the third quarter and its approximately 40% interest in LPW Technology in October. It recorded a $7.0 million gain on the Solidscape divestment and a $13.5 million gain on the LPW divestment. Evolve-related items included a $1.6 million loss in operating expenses and a $5.0 million write-off of in-process R&D.
- CEO Ilan Levin resigned effective at the start of June 2018. Chairman Elchanan Jaglom served as interim CEO, supported by a board oversight committee; the company said it was searching for a permanent successor.
- No specific forward-year revenue or earnings guidance is presented in the supplied filing text. Management described continued investment in FDM and PolyJet, a developing metal-printing platform, composite materials, software and new applications.
- Goodwill was $385.8 million, including approximately $386 million allocated to the Stratasys-Objet reporting unit. Its estimated fair value exceeded carrying value by about 8%; a 1 percentage-point increase in the discount rate would reduce estimated fair value by approximately $80 million. No goodwill impairment was recorded for 2018.
- Key risks include intense competition and pricing pressure, uncertain adoption of 3D printing, product and service mix affecting margins, reliance on sole or limited suppliers (including Ricoh printer heads), foreign-exchange exposure, and potential impairment of goodwill. The company also disclosed a former employee’s Israeli patent-law claim seeking compensation and royalties; Stratasys disputes the claim and is defending it. The filing does not provide a clear estimate of potential loss.
Important facts for investors to verify
- Whether systems revenue and overall demand recover, and whether growth in consumables and services is sustainable.
- How much of the improvement in GAAP losses reflects durable cost performance versus divestiture gains, tax effects and other unusual items.
- Whether goodwill valuation assumptions remain supportable, given the limited reported fair-value cushion and sensitivity to discount rates.
- The status and possible financial exposure of the former-employee patent claim, and any material changes to other contingencies.
- Progress on appointing a permanent CEO, and the performance and commercialization timeline of the metal-printing platform.
- Debt terms, liquidity and capital spending, including the effects of interest-rate and currency movements.