Stratasys, Ltd.

Good day, and welcome to today's conference to discuss Stratasys' fourth quarter and full year 2023 financial results. My name is Kevin, and I'll be your operator for today's call. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad, and we ask that you please ask one question and one follow-up. And now I'd like to turn the call over to Yona Lloyd, Chief Communications Officer and Vice President of Investor Relations for Stratasys. Mr. Lloyd, please go ahead.

Good morning, everyone, and thank you for joining us to discuss our 2023 fourth quarter and full year 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 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 Stratasys' annual reports on Form 20F for the 2022 year and for the 2023 year, the latter of which will be filed with the SEC in the coming few days. Please also refer to our operating and financial review and prospects for 2022 and 2023, which are included as Item 5 of our annual reports on Form 20F for 2022 and 2023. Please also see the press release that announces our earnings for the fourth quarter of 2023, which is attached as Exhibit 99.1 to a report on Form 6K that we are furnishing to the SEC today. 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. In the fourth quarter, we once again demonstrated that the diversity of our offerings and the strength of our go-to-market operations can deliver profitable results. We achieved these results in what has continued to be a CapEx-constrained environment for our customers, and a challenging chapter for our industry. I am particularly pleased to report that we delivered another record quarter of consumables revenue, a testament to strong usage of our systems. We also achieved our 10th consecutive quarter of profitability on an adjusted basis. which reflect the discipline of our business model that differentiates us in our sector. Stratasys is laying the foundation for meaningful use cases that will significantly contribute to our financial performance. Our suite of offerings features best-in-class technologies that allow our customers to advance their use of additive manufacturing and increasingly broaden applications into manufacturing at scale. As our new branding states, we make additive work for our customers. And we see that playing out every day, whether it is the strong utilization of systems they purchased from us in the past, or in the continued high level of engagement we see today for new systems incorporating cutting-edge technologies. As the macro business environments continue to improve and capital spending patterns return to normal, we expect the pent-up demand to re-accelerate growth, particularly in our system sales. We delivered solid revenues in 2023 of $628 million, down 3.7% versus 2022, but up 1.3% after excluding the MakerBot divestiture and the two businesses we divested from our Stratasys Direct Service Bureau, showing remarkable resilience against a severely CapEx-constrained environment for our customers. We improved our gross margin for the year despite the modest change in revenues, reflecting our focus on cost controls and operating efficiencies. And we delivered 11 cents in adjusted EPS in 2023. We are confident that as our new technologies ramp and our operational efficiencies continue, gross margins and profitability will strengthen in 2024 and beyond. We continue to maintain a healthy balance sheet that provides stability through challenging times and optionality to support our growth through both organic investment and accretive acquisition opportunities. And as we shared each year, in 2023, we generated 34% of our revenues from manufacturing, up from 32.5% in 2022. We expect to see this metric grow stronger as global business conditions improve, to a point where the majority of our business will come from end-part manufacturing at scale. Now let me touch on some of our success stories for the quarter, starting with our industrial business. 35 years ago, our founder, Scott Cramp, invented FDM 3D printing, which remains by far the industry's most popular technology. Since its introduction, Stratasys has consistently been the leader for industrial FDM manufacturing. And in the fourth quarter, we brought another major technology innovation to market with the F3300 printer, our first FDM printer on a platform designed to support scalable production. The F3300 doubles the speed of existing technology with greater reliability and operating efficiency while being geared toward manufacturing at higher volumes. We work closely with our customers for several years to deliver this new system and are proud that Toyota is our first customer. The F3300 can be used for production of parts, fixtures, and prototyping applications to help bring new products to market faster. Our F3300 pipeline is strong with accelerating interest and engagement levels, and we look forward to sharing more customers with. Also in automotive, we recently launched an initiative to help Daimler track North America, produce more manufacturing support parts, and functional prototypes. By adding our H350 system paired with GrabCut Print Pro to their existing portfolio of Stratasys printers, Daimler expects to see significant improvement in their prototyping and a shift to manufacturing starting this year. Our new line of stereolithography printers had a strong finish to the year, including orders from Whirlpool and multiple service bureaus in the US and Europe. And already in 2024, Parts2Go, a German service bureau that had two NIO printers, purchased four more systems, enabling them to produce high-quality, accurate, and repeatable parts for their customers' industrial-level application needs. We also made further inroads in the Formula One racing community, with multi-unit sales of NIO SLA systems to Toyota, F1 McLaren, and other industry leaders for use in wind tunnel testing and tooling. This is particularly promising in that it demonstrates our technology's ability to deliver accuracy, consistency, and reliability at the highest level of automotive standards. We expect this will result in transferability to mainstream automotive manufacturing. While the new system is exciting for its use in prototyping and tooling today, the real competitive advantage will come with the next version, expected in 2025, which will shift the focus of that technology to end-part manufacturing. Further on in automotive, we increased our exposure to automotive interior design with our PolyJet technology through collaboration with Mercedes-Benz, Maserati, Volkswagen, and Stellantis. All in all, we are on the path for what we believe will be serial production use cases for the automotive industry. Next, I'd like to provide some highlights on our dental applications and key milestones. Dental continues to be one of the largest and most exciting road avenue for the 3D printing industry, and for Stratasys in particular. As a reminder, our activities are focused on dentures and other non-discretionary restorative spending. In 2023, dental continued to grow, and we expect this trend to accelerate. This growth came two ways. First, we further expanded our customer base with new product offerings to address a broader range of applications in a more economically beneficial way. including dentures, implants, models, surgical guides, and other parts used in fixed restoration cases. Our TrueDent solution rollout during the first quarter of 2023 is a great example of how customers can use 3D printing to replace conventional manufacturing technologies. Pairing TrueDent resins and workflows with our J5 Dentajet printers allow the creation of a full, permanent, monolithic denture. No other technology in the world is able to provide this at scale. This pairing also enables us to lower production costs and labor for labs by more than 50%, while improving form, fit, and function for the patient. Leading labs networks and dental support organizations, or DSOs, in the US and Europe who are new customer for Stratasys have began deploying this offering to better serve their patients and have provided us with excellent feedback on clinical outcome and patient satisfaction. As a real-life example of just how disruptive and impactful Prudent is, last month we announced our partnership with Express Dental of Oklahoma at a two-day event where dental services are provided for free to those in need. Over 55 people had their mouth scanned on the first day, and the very next day went home with a brand new set of dentures, courtesy of Trudent. This level of speed, accuracy, and low cost has never been possible at scale. Until today, we plan to roll out new business models and partnerships to accelerate adoption of additive manufacturing in dentistry and expect this business to meaningfully accelerate in the years to come as we continue to win business from conventional manufacturing. And second, we delivered growth in dental to our existing customers, expanding their fleet and increasing utilization of our resins on our newest platforms. This was a significant contribution to our revenue growth in consumer goals in 2023. Now switching to medical, where some of the most exciting opportunities for future growth are being developed. During the quarter, we announced a partnership with Siemens Healthineers to carry out a landmark research project. This project is designed to develop new state-of-the-art solutions for the advancement of medical imaging phantoms for computed tomography imaging. These are used around the world to evaluate and ensure optimal performance of CT scanners. We also announced that the University Hospital Birmingham in England has been using tailored 3D printing cutting guides to improve surgical outcomes for head and neck cancer patients. produced exclusively using our J5 MediJet printer. This success demonstrates that our technology enables the creation of vital, highly accurate, patient-specific cutting guides ahead of surgical procedures. And I would be remiss if I didn't express my pride in Stratasys winning the medical, dental, or healthcare application category at the prestigious 3D printing industry awards in London in December, where our J5 DentaJet, MediJet, and J850 digital anatomy printers beat out a field of nine competitors. Turning to software, we have a long-term plan to monetize our software offering and create new streams of recurring revenue by adding value through new features and products to our free GrabCAD platform. both for use with our own systems and for those who partner with us. In 2023, we demonstrated early success in our channel's ability to sell software alongside new printers. A major attribute for the new software is the ability to help service bureaus and internal 3D print shops rapidly and accurately estimate the cost and time of printed parts. And we have intensified our effort to expand a subscription software business with the Pro version of our popular GrabCut software. GrabCut Print is used by over 85% of our customers and over 40,000 users worldwide. GrabCut Print Pro is targeted at helping users achieve 3D printing that is faster, more accurate, and more economical. with the ability to print multiple parts for multiple customers on multiple printers simultaneously. GraphCut Print Pro is currently available on FDM and SAF systems, and a few days ago we announced we are now in the process of adding it to PolyJet. We expect to support it across our full suite of technology offerings once we add it to the P3 and Neo in the future. And turning to new materials, We have recently announced our Origin 1 DLP system, which is building a leading position for production of manufacturing aids, particularly in the automotive industry. We recently introduced our new SOMOS Weather X100 material. This is our first material using SAE automotive industry standards that is tested for weatherability, UV durability, and dimensional accuracy. With the introduction of this and additional material during 2024, we plan to strengthen our position in DLP and open more manufacturing use cases. Before I turn the call over to our CFO, Ethan Zamir, a word regarding the strategic review we announced in the third quarter of 2023. The comprehensive process is ongoing and our Board of Directors is considering and evaluating all avenues to maximize value. As we announced previously, we do not intend to disclose further developments on the strategic review process unless and until we determine that such disclosure is appropriate or necessary. To sum up, even against a challenging backdrop, we continue to deliver differentiated products and solutions to customers across a wide array of end users, setting the stage for increased growth based on accelerated adoption of additive manufacturing as macroeconomic conditions improve. I will now turn the call over to Eitan to share the financial results and our initial outlook for 2024. Eitan?