Stratasys, Ltd.

Greetings and welcome to Stratasys Q4 and full year 2021 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please place star zero on your telephone keypad. As a reminder, This conference is being recorded. I would now like to turn the conference over to your host, Mr. Jonah Lloyd, Chief Communications Officer and Vice President of Investor Relations.

Good morning, everyone, and thank you for joining us to discuss our 2021 fourth quarter and year-end financial results. On the call with us today are our CEO, Dr. Yoav Zaif, and our new CFO, Eytan Zamir. I would like to remind you that access to today's call, including the slide presentation, is available online at the web address provided in our press release. In addition, a replay of today's call, including access to the slide presentation, will also be available and can be accessed through the investor relations section of our website. Please note that some of the information you will hear during our discussion today will consist of forward-looking statements including, without limitation, those regarding our expectations as to our future revenue, gross margin, operating expenses, taxes, and other future financial performance and our expectations for our business outlook. All statements that speak to future performance, events, expectations, or results are forward-looking statements. Actual results or trends could differ materially from our forecasts. For risks that could cause actual results to be materially different from those set forth in forward-looking statements, please refer to the risk factors discussed or referenced in Stratasys' annual report on Form 20F for the 2021 year, which we expect to file with the SEC over the course of the next day. Please also refer to our operating and financial review and prospects for the 2021 year, which is included as item five of that annual report, as well as the press release that announces our earnings for the fourth quarter of and full year, 2021, which is attached as an exhibit to a report on Form 6-K that we are furnishing to the SEC today. In order to obtain updated information throughout the year concerning our quarterly results of operations and the risks and other factors that most impact those results, please see the quarterly earnings press releases and our quarterly operating and financial review and prospects each of which will be attached as an exhibit to a report on Form 6K that we will furnish to the SEC on a quarterly basis over the course of the year. Stratasys assumes no obligation to update any forward-looking statements or information which speak as of their respective dates. As in previous quarters, today's call will include GAAP and non-GAAP financial measures. The non-GAAP financial measures should be read in combination with our GAAP metrics to evaluate our performance. Non-gap-to-gap reconciliations are provided in tables in our slide presentation and today's press release. I'll now turn the call over to our Chief Executive Officer, Dr. Yoav Zaif.

Yoav? Thank you, Yonah. Good morning, everyone, and thank you for joining us. Stratasys had a strong quarter, with over 17% revenue growth compared to the same period last year, driven by the highest system sales since Q4 of 2018. Each of our technologies and all of our regions contributed to this growth. I will share a general overview of our achievements and milestones in 2021, and after our financials and guidance, I will conclude with some thoughts for 2022. Strategies today is in a very different place than it was at the beginning of 2021. Until last year, our business had been centered around two core technologies, FDM and PolyJet. And while we maintained leadership in these areas, this limited portfolio meant we were missing opportunities to participate more fully in the fast-growing applications at the heart of the shift from prototyping to manufacturing. And we had not developed and launched meaningful product upgrades in a number of years. It was critical to evaluate the entire business and target strategic investment to evolve our product portfolio. We established our strategy to be the first choice in polymer 3D printing, encompassing the entire product lifecycle with multiple technologies and complete solutions for superior application fit across design, manufacturing, and healthcare. We believe this approach provides the largest total addressable market in the industry. This strategic focus drove us to specifically increase our exposure to manufacturing applications. A year ago, we shared that in 2020, over 25% of our revenues came from manufacturing. We are pleased to say that for 2021, it was 29%, and we expect 2022 manufacturing sales to grow at least 20%. Clearly, our focus on manufacturing is working. We accomplished this with new systems tailored to manufacturing at scale, a software platform to integrate the entire manufacturing digital thread, and a material strategy that rapidly opens up new applications for our customers. Today, we are collaborating with the world's leading materials companies, software partners, and our customers, creating many new avenues for growth through a combination of direct sales and licensing. We are excited about this broader portfolio and believe it will further complement our systems offering to help drive our overall growth strategy. And there is more to come in the years ahead. We also dramatically strengthened our balance sheet in 2021. At year end, we had over 500 million in cash and equivalent, up from 272 million as of the end of 2020, giving us flexibility to seek opportunities that will support our future growth. We believe that by continuing to prudently invest capital back into the business, we will achieve meaningfully accelerated revenue, earnings, and cash flow in the years ahead. Now, let me provide more specific color on our 2021 accomplishments that were supported by our strong balance sheet. The first area of focus was strategic acquisitions, including Origin, which was completed at the very end of 2020, RPS, and ZAR3D. which will support our customers' manufacturing needs and begin notably contributing to our growth in 2022. Next, we extended our software capabilities and plan to add licensing to give customers access to our new open materials options. Additionally, we initiated a long-term technology invested arm that has already deployed capital in companies with cutting-edge technologies such as material jetting, post-processing, and continuous carbon fiber. Building on our five industry-leading 3D printing technologies, we introduced several new product offerings over the course of the year, including three systems targeting our manufacturing customers. First, the OriginOne, designed for end-use manufacturing applications. that uses P3 technology to produce parts at volume from a wide range of third-party photopolymer materials. After a very successful beta program, we just recently started shipping this system. Next, the H350, the first of our new H-series powder bed systems powered by SAS technology and built to deliver production-level throughput. of end-use parts, which we started shipping in December. And the F770, an FDM printer ideal for large parts, featuring the longest fully-heated build chamber on the market. We also introduced 3D printers tailored to some of our most important industry application segments. These include the Origin One dental printer and the J5 dental jet. Together, they provide dental labs with comprehensive additive manufacturing solutions for the large and growing dental market. We also launched the J5 MediJet printer, which gives healthcare customers the ability to print highly detailed anatomic models and drilling and cutting guides quickly and cost-effectively with approved third-party 510K cleared segmentation software. We introduced the J35 Pro and J55 Prime PolyJet printers, along with new software solutions for research and packaging prototyping. Finally, after acquiring RPS in Q1 last year, we launched the new line of industrial stereolithography systems, expanding our offering to use cases such as investment casting patterns, orthodontic clear aligners molds, and large design parts. In addition to the new system, we made significant progress on increasing our software focus and offering. We introduced an enterprise-ready open software platform tailor-made for manufacturing. This is important because it gives our customers the ability to integrate fleets of Stratasys printers with their existing Industry 4.0 infrastructure and workflow. allowing them to really scale their use of editing manufacturing. It also strengthens our relationship with our customers because we can use software to continue to add value to their investment in 3D printers. That in turn means recurring software revenues can become a growing contributor to our business. For example, we announced that we have extended GrabCut print software to our H350 printer. For an annual licensing fee, this enables enhanced functionality focused on optimizing production throughput that is specifically designed for end-use parts manufacturing at scale. We also continue to invest in additive specific applications to streamline the workflow of orders to the factory shop. On the material side, we introduced CF10, our new carbon fiber material that we believe will increase the adoption of our technology into production lines, especially for manufacturing aids. CF10 has also proven to be a catalyst for increased sales of our F370 system. And we introduced open materials options for FDM that we plan to launch in the back half of this year, starting with our Photos 450. We expect this to spare materials innovation, accelerate the adoption and expansion of our consumables, and contribute to increasing our software revenues. We also entered into a number of important partnerships, including Echo, Adobe, Red Hat, and others, as we seek to provide our customers with complete end-to-end solutions for specific industry applications. These accomplishments in 2021 were thanks to the hard work of our exceptional team at Strategies. Together, while managing through the many pandemic and related challenges, we successfully launched over 30 new products into the market. I am very proud of our team. and excited to experience even more this year. As we execute on our strategy and build momentum, customers continue to express their confidence in strategies. For example, Echo, a leading global shoe manufacturer, is using our Origin One to print molds and shoe lasts for development purposes. Not only do these parts fully match the quality requirements of their CNC machined aluminum counterparts, but they are faster to produce and far more economical. Another example is Redford Motors, one of the two automotive OEMs that are already utilizing all five of our technologies. For each of their coach-built supercars, Redford prints hundreds of Stratasys parts from design through prototyping, tooling, and end-use parts that can be found on the final vehicle. We believe this level of 3D printing technology adoption will become standard in the automotive industry. I would like to take a moment to discuss our effort and accomplishments with regard to ESG. This is an area of primary focus for our company. and our industry 3d printing has the ability today to address many of the environmental issues facing global manufacturing and we are at the forefront of those efforts at stratasys we are deeply embedding our esg strategy in our products and processes as part of our dna and company purpose to empower people to create without limits for an economical, personalized, and sustainable world. We are addressing many of our business processes, and along with our customers, we seek to take climate action while improving social impact. We call it mindful manufacturing, a call to action to redesign processes, part and supply chains, with great thoughts and clear intentions to secure manufacturing, utilizing 3D printing in a way that maximizes sustainability while also supporting business growth. By digitizing, localizing, and optimizing for additive manufacturing, we believe net zero targets are not only achievable but easier to reach than with traditional manufacturing technologies and processes. Our efforts encompass product innovation and improved circular economy for additive manufacturing and extensive outreach in our communities through education and healthcare CSR activities around the world. We plan to publish a first of its kind market leading pure polymer additive manufacturing GRI sustainability report next quarter. As market leader in 3D printing, we see our role as leading the shift to responsible consumption and production, helping our customer achieve their carbon neutrality net zero goals and working to address our own footprint. Supported by the data and research needed to drive this transformation, for the entire additive manufacturing industry. Before I turn the call over to our new CFO, Eitan Zamir, to share the financial results, I wish to thank Lilach Pajorski for her leadership and many significant contributions to Stratasys over the past nine years. Lilach built a strong, talented finance organization and her dedication to excellence and professional expertise has helped to preserve and strengthen our financial health as we navigated dynamic markets and pursued strategic growth initiatives. We wish her the best in her future endeavors.