Stratasys, Ltd.

Good day, and welcome to today's conference call to discuss Stratasys' first quarter of 2026 financial results. My name is Daryl, and I'll be your operator for today's call. And now, I'd like to hand the call over to Jonah 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 2026 first 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 provided 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 2025 year. Please also refer to that annual report along with our reports filed with or furnished to the SEC throughout 2026 for additional operational and financial details. Reports on Form 6K that are furnished to the SEC on a quarterly basis and throughout the year provide updated current information regarding the company's 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 Zaif. Yoav?

Thank you, Yonah. Good morning, everyone, and thank you for joining us. Our first quarter results reflect the continued resilience of our operating model in a measured spending environment. Recurring revenue streams from consumables and customer support continues to provide stability while printers' purchasing timelines remained extended, as customers exercised capital discipline amid ongoing global uncertainty. Meanwhile, we remain focused on executing our strategy to grow as we deepen our penetration into manufacturing. On a sequential basis, compared to the fourth quarter of 2025, consumables and services both grew slightly, and strategies direct delivered over 10% sequential growth and 23% organically after divestments when compared to the first quarter of 2025, reinforcing the trajectory of our production parts business as was the case for the full year 2025. The top three parts customers were again all U.S.-based drone-related companies, But note that Stratasys Direct produces end-use parts across a wide variety of industrial applications, using Stratasys printers almost exclusively demonstrating the versatility of our technologies and the view into its potential future benefits. At the same time, we continue to make meaningful strategic progress, innovation, Customer engagement and market development remain the foundation of our long-term growth strategy, one that centers on secular megatrends of supply chain protection and operational efficiency, reshaping global manufacturing. Nowhere are these megatrends more pronounced than in aerospace and defense, where mission-critical performance requirements supply chain resilience mandates, and expanding U.S. Department of War investment in advanced digital manufacturing are creating a strong structural demand environment. To that point, we believe Stratasys is uniquely positioned to win. In a tire-sensitive environment in particular, our platform's ability to enable local, rapid, and cost-effective production is a genuine competitive advantage, one we continue to highlight in customer conversation and one we expect will accelerate adoption over time. Turning to new technology developments and customer activity. In aerospace and defense, we continue to demonstrate the depth and durability of our position this quarter. As a reminder, Stratasys has deployed thousands of systems across aerospace and defense production environments worldwide. We serve as a program of record for the U.S. Air Force and NAVAIR. Our technology is embedded across active platforms from C-17 microvanes that save an estimated $14 million annually in Air Force fuel costs to certified flight-ready parts produced for the world's leading aircraft manufacturer. Stratasys Direct, our parts manufacturing division, ships over 100,000 parts annually to the defense industry and operates under certified quality systems, including AS9100, ISO, 9001 CMMC compliance and ITAL requirements. This is not prototype stage or pilot stage engagement. This is production scale additive manufacturing at operational tempo for the most demanding customers in the world. Against that backdrop, our selection in the first quarter for the U.S. Department of War's Joint Additive Manufacturing Acceptability IV pilot parts program is a meaningful endorsement. GAMA IV is a multimillion-dollar initiative to accelerate the qualification and deployment of 3D-printed parts across military platforms, and Stratasys Direct was selected on the basis of its proven production role across thousands of active military systems. The program positions us to extend our share of U.S. defense additive spending, a budget which surged 83% for fiscal year 2026, and continues to flow into qualification and deployment for the Department of War. More broadly, our customer engagement across leading aerospace contractors and OEMs remained substantive, with use cases advancing through qualification pipelines from production tooling to certified flight-ready components. These cycles are long, but the outcomes generate durable recurring demand, anchored in certification and workflow integration, exactly the kind of revenue profile that strengthens our business over time. And we are seeing continued momentum in high reliability aerospace applications with thousands of parts in orbit leveraging our materials. In fact, on the recent Artemis II moon mission, hundreds of components produced with stratosis and terro materials on our FDM system were flown. highlighting the maturity and scalability of additive manufacturing in space systems. This is a strong validation of the high-performance applications of our materials and our position in mission-critical environments, reinforcing the growing role of additive in next-generation space and defense platforms. In DENTAL, we reached an important regulatory milestone. Trudent Resins received CE Class II-A medical device certification, making Trudent the first polychromatic monolithic 3D printed denture solution. Certified at this classification in Europe, a segment projected at $2.45 billion by 2028. This upgrade from the prior CE Class 1 designation extends through dense indications to include long-term intraoral removables and crowns and bridges, broadening the range of restorative cases dental laboratories can address through a single integrated digital workflow. is a regulatory classification clinicians and laboratories routinely expect for restorative dental materials. Achieving it removes a meaningful adoption barrier, strengthens biocompatibility, and safety confidence for clinicians and patients, and positions strategies to deepen penetration across European dental labs and clinics as digital venture production scales. Importantly, the transition to Class 2A requires no change to print setting formulation workflow or shelf life on our J5 DentaJet platform, making this a frictionless extension of our commercial reach in regulated European regions. We believe we are building the commercial and regulatory foundation for meaningful growth in this vertical. On the material and software side, we continue to invest in expanding what our install base can do. Ultem 1010 resin is now available as filament for the F3300 printer, enabling the production of aerospace-grade high-temperature parts with the lowest coefficient of thermal expansion in FDM portfolio. Optimized for composite tooling applications, Ultem 1010 on the F3300 allows manufacturers to produce precision fixtures and tools that maintain reliability in demanding environments, and to do so faster at lower cost per part relative to prior configurations. And on our PolyJet systems, we recently expanded TAF1 to be available on the J3 and J5 series. TAF1 is an advanced material engineered for strong, durable, functional prototyping, as well as end-use parts. Material extensions like these are designed to further drive consumable attach rate and deepen application coverage. On the software side, measurement-based warp adaptive modeling has been integrated into GrabCAD PrintPro, using measured dimension data to automatically correct warping on the Origin P3 platform. For complex parts like electrical connectors, precision jigs, and industrial fixtures, This eliminates the iterative correction cycle that have historically added time and cost, and it delivers a meaningfully better experience for customers scaling production on our DLP platforms. With that, I will turn the call to Eitan to review our financials. Eitan? Thank you, Yoav, and good morning, everyone. Our first quarter results reflect continued execution against the operational priorities we established at the start of the year. In an environment where customers remain deliberate on capital spending, we maintained adjusted EBITDA profitability and generated positive operating cash flow. Outcomes that reflect both the structural improvement embedded in our cost model and the stability of our recurring revenue base. Let me get into the details. First quarter consolidated revenue was 132.7 million, down approximately 2.4% year over year. Product revenue in the first quarter was 88.8 million, compared to 93.8 million in the same period last year. Within product revenue, system revenue was $28.8 million compared to $31.2 million in the same period last year. Consumables revenue was $60 million compared to $62.6 million in the same period last year. Service revenue, which includes strategies direct, was $43.9 million compared to $42.2 million in the same period last year. Driven by 23% organic growth after divestments in strategies direct, as compared to the first quarter of 2025. Within service revenue, customer support revenue was $29.7 million, compared to $30 million in the same period last year. Now, turning to gross margins. Gap gross margin was 41.7% for the quarter, compared to 44.3% for the same period last year. Non-GAAP gross margin was 46.3% for the quarter, compared to 48.3% in the same period last year. The change was primarily due to the 180 BIPs impact of 2.4 million of year-over-year incremental tariff expense, as well as from lower revenue. While we typically do not reference sequential margin improvement, We believe that despite the reduction in revenue from fourth quarter, margins were sequentially flat, marking a positive mixed efficiency. Gap operating expenses were $81.9 million, compared to $72.6 million during the same period last year. The rise in expenses was primarily due to an increase in professional fees and the impact of foreign currency exchange due to the significant appreciation of the new Israeli shekel relative to the U.S. dollar. Non-debt operating expenses were 64.6 million compared to 62.6 million during the same period last year. The increase was primarily due to the impact of foreign currency exchange rates given the increased strength of the shekel against the dollar of approximately 3.1 million. Regarding our consolidated earnings, GAAP operating loss for the quarter was 26.5 million compared to a loss of 12.4 million for the same period last year. Non-GAAP operating loss for the quarter was 3.2 million compared to operating income of 3 million for the same period last year. Adjusted EBITDA was 2 million for the quarter. compared to 8.2 million in the same period last year. The change in both was primarily due to the impact of approximately 5.3 million of FX and SARIS pressures. Gap net loss for the quarter was 23.8 million, or 28 cents per diluted share, compared to a net loss of 13.1 million, or 18 cents per diluted share, for the same period last year. Non-GAAP net loss for the quarter was $1.3 million, or $0.01 per diluted share, compared to a net income of $2.9 million, or $0.04 per diluted share, in the same period last year. From a cash flow perspective, we generated $2.4 million in operating cash flow in the first quarter, reflecting working capital discipline and the structural cost improvements we've embedded over the past several quarters. This builds on the 15.1 million in operating cash flow we delivered for the full year of 2025, and we remain confident in our ability to expand cash generation as revenue scales through the years. We ended the quarter with 237.8 million in cash, cash equivalent, and short-term deposits. Our balance sheet remains strong and debt-free, providing the financial flexibility to continue investing in technology, market development, and inorganic opportunities to drive further growth. Regarding our outlook for 2026, our first quarter performance is consistent with the framework we established at the start of the year. And we are reiterating the full year guidance we provided on our last call. Revenues are expected to range between 565 to $575 million, growing sequentially each quarter through the year. And we expect 2026 consumable revenue to increase over 2025. Please refer to the press release or slide presentation for further details. With that, let me turn the call back over to Yoav for closing remarks. Yoav? Thank you, Eitan. Coming out of the first quarter, our customer engagement continues to increase, and our deal pipeline for 2026 and beyond continues to build, especially in defense. The strategic progress we share today reinforces the trajectory we plan for tomorrow. Our solution for the defense industry are no longer just emerging, but are established, certified, and operating at scale across active military platforms. We have increased access to multi-billion dollar regulated European dental verticals with a product already proven and deployable without workflow disruption, supported by positive operating cash flow and a debt-free balance sheet, we have built multiple opportunities to generate profitable growth, both through inorganic and organic opportunities, focusing on our position in high-requirement use cases, as we capitalize on the increased demand for additive manufacturing solutions. With that, let's open it up for questions. Operator?