Stratasys, Ltd.

Hello, and welcome to the Stratasys Q3 2023 Earnings Conference Call and Webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Yona Lloyd, Chief Communications Officer and Vice President, Investor Relations. Please go ahead, Yonah.

Good morning, everyone, and thank you for joining us to discuss our 2023 third quarter financial results. On the call with us today are our CEO, Dr. Yoav Zaif, and our CFO, Eitan 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 forecast. 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 Stratus' annual report on Form 20F for the 2022 year. Please also refer to our operating and financial review and prospects for 2022. And for the third quarter of 2023, which are included as item five of our annual report, on Form 20F for 2022 and in Exhibit 99.2 to the report on Form 6K that we are furnishing to the SEC today, respectively. Please also see the press release that announces our earnings for the third quarter of 2023, which is attached as Exhibit 99.1 to a separate report on Form 6K that we are furnishing to the SEC today. Our reports on Form 6K that we furnish to the SEC on a quarterly basis and throughout the year Provide updated current information regarding our operating results and material developments concerning our company. 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-GAAP to GAAP reconciliations are provided in tables in our slide presentation and today's press release. I will now turn the call over to our Chief Executive Officer, Dr. Yoav Zeif. Yoav?

Thank you, Yonah. Good morning, everyone, and thank you for joining us. Before going to our business update, I'd like to comment about the situation in Israel. Israel is home to about 25% of our employees who have been performing in an exemplary fashion during the war. Whether it be serving the country or maintaining our business, there has been no fundamental impact on our operations. And our factory and offices have been open throughout. We are proud of our employees and the spirit of our country during these difficult times. Before I turn to the third quarter results, as you may have seen this morning, we announced that Aris Kekagian was appointed to our board of directors, effective immediately. Aris is a seasoned executive with more than 30 years of leadership experience, and we are pleased to have him bring expertise across business development, M&A, and operations of complex cross-border businesses at scale. As always, our board is committed to ongoing refreshment and continues to take steps that will enhance value for our shareholder. Ari's appointment follows Ziva Patir's decision to step down from Stratasys board following 10 years of service as a director. We are grateful to Ziva for her commitment and many contributions to the company and wish her all the best. And for the third quarter, we accomplished our results against the ongoing challenging global macro backdrop that is marked by slower growth, higher interest rates, and constrained capital spending. During the third quarter, we achieved record recurring revenue from consumable sales, reflecting solid utilization of our printers and demonstrating our resilient business model and financial profile. Customer demand and our engagement with both our installed base and new customers continues to be stronger than ever. The results show that our customer recognize our unique combination of industry leading polymer technologies, the broader set of polymer materials, a unified software platform across the portfolio unmatched go-to-market capabilities, and excellent customer service. And we continue to invest and innovate to stay at the forefront of additive manufacturing while growing the business across our end-use segment. Our portfolio of technology offerings continues to expand with particular focus on manufacturing applications. We deliver results comparable to the year-ago period for revenues, non-GAAP margin, and adjusted EBITDA, despite the increasingly challenging environment for capital spending for our customers adding into year-end. Additionally, we kept non-GAAP OPEX costs as a percentage of revenue flat relative to the year-ago period. As a result of our effort I'm proud that we delivered positive adjusted earnings per share for the ninth consecutive quarter. And to help further improve profitability going forward, we recently divested two lower margin, unprofitable businesses from our strategies direct service bureau. This is expected to reduce 2023 revenue by 5 million, but help improve profitability and focus in 2024 and beyond. We ended the quarter with a strong balance sheet of 185 million in cash, equivalent and short-term deposits, and no debt. This continues to support our ability to grow through combination of organic investment and accretive acquisition opportunities that will further our strategic objective to be the leading provider of additive manufacturing solutions. Our vision for the future of additive manufacturing and our leadership position in this industry is more robust than ever. Now let me touch on some of our recent business highlights and milestones. On the industrial side, I want to highlight the launch of our very exciting and innovative F3300 just last week at Formnext. The F3300 is up to two times faster than other polymer filament printers available today. This inaugural edition of our new FDM enterprise platform family is custom built specifically for manufacturing. Significant advancements in speed, reliability, and operating efficiency demonstrate our continued commitment to innovation and will bring greater economic advantage to existing users and open up new application opportunities. The increased speed of the F3300 stands out relative to any other polymer filament printers available today, with increased gantry speed and material extrusion. It also offers up to 45% cost per part reduction compared to existing solutions. It is loaded with sensors, which will over time provide part and print data collection capabilities to support foreseeable usage around quality and predictable outcomes. The F3300 Initially planned for commercial availability during the fourth quarter of 2023. Is now planned for the first half of next year. As a reminder, Stratasys invented FDM over 35 years ago. It is the world's most popular 3D printing technology. And we lead across aerospace, automotive, and defense applications. This new F3300 platform was developed with tremendously valuable input from many of our customers over the last several years, tailored to address their production requirement. This program included Toyota, who we announced has become our first F3300 customer. The F3300, together with our other manufacturing solutions, such as H350 Soft and Origin P3, a production-oriented system that will expand our addressable market, facilitate growth, and drive our continued leadership. Turning to some customer success from our industrial business. We are appreciative that the US Army Picatinny Arsenal further demonstrated its confidence in strategies by placing a significant order across our entire portfolio of five polymer technologies. FDM, PolyJet, SAF, Origin P3, and Neocerolitography. These printers will be used across multiple military facilities. The strategic importance of Picatinny making such an investment in strategies is key, as they are the organization that leads the additive manufacturing effort for the US Army. In automotive, FAW, China's largest only-owned auto manufacturer, installed a variety of strategy systems in its effort to build a world-class additive manufacturing center with a goal of staying at the forefront of the digital manufacturing transformation. Its newly installed base includes Origin 1, PolyJet J850 Prime, and multiple F900 FDM systems. And we look forward to growing that relationship further. Subsequent to quarter end, we hosted our Stratafest event focused on aerospace and automotive, featuring customer testimonials from Northrop Grumman and Redford Motors. Redford is a great case study for additive manufacturing, as its Lotus Type 62 2 automobile is produced using approximately 250 parts printed with our FDM system to deliver unparalleled performance. Turning to slide 8, our dental business continues to build strong foundations for growth. as customers are scaling up with multiple unit orders and expansion of their portfolios for both ortho and implant applications. In the U.S., with its 5 billion plus dentures industry, customers are increasing adoption of our disruptive prudent solution, and we expect continued acceleration in the years ahead. In the EU, we have received positive feedback from top five lab networks and we expect to expand our penetration there once Prudent receives CE approval. On the healthcare front, we recently signed a partnership agreement with NC GmbH, a long-time Stratasys partner, to establish a new division called NC Medical that we specialize and focus on delivering Stratasys medical solutions to the German market. This is part of a global strategic decision to expand our reseller network through partners who specialize in the medical field. We believe this will help increase our coverage, focus, and dedication to our healthcare customer. Another new development is our relationship with Go Orthotics, an innovator and manufacturer of custom-made orthotics for podiatrists. They have purchased Multiple soft printers that enable them to quickly produce custom orthotics with high specification increase manufacturing throughput while saving vast working time and achieve superior product fit and comfort not possible with traditional manufacturing. The custom foot orthotic opportunity is expected to more than double to $8.8 billion by 2032. Turning to software, I'm pleased to say that after running a free trial program, we have commercialized our premium offerings. Our software has always been critical to our customer success, but we have only recently expanded our portfolio to include subscription-only offerings with GrabCat Print Pro and OpenAM. Approximately half of our new FDM and SaaS customers have chosen to subscribe to GrabCut Print Pro, and we plan to offer it across PolyJet, Neo, and Origin as well. On our material side, we have added a number of enhancements to our flagship F900 series, including offering new polymers, colors, and support materials. We have also expanded the functionality of the F900 series to OpenAM, by allowing users to custom-tune materials and printed parts capabilities. This provides additional functionality as they can alter the characteristics of strategies and third-party materials and print their own formulations, opening up new applications to expand the reach of our product and materials portfolio. I will now turn the call over to our CFO, Eitan Zamir, to share the financial results and updates on our outlook for the rest of 2023. Eitan?